India’s USD 32 billion gems and jewellery industry is facing significant challenges, with experts predicting a sharp decline in exports following the announcement of hefty U.S. tariffs, according to a Reuters report.
The new tariffs, which will affect the sector’s largest market, are expected to impede India’s ability to maintain its position as the global leader in diamond cutting and jewellery manufacturing. The United States accounts for nearly 30.4 per cent of India’s annual gems and jewellery exports, amounting to approximately USD 10 billion.
“The tariff is higher than expected,” said Colin Shah, managing director of Kama Jewelry, one of India’s leading diamond jewellery manufacturers. “It is quite severe and will affect exports,” he said.
The impact of these tariffs will be especially significant as India remains the world’s largest hub for diamond cutting and polishing, handling approximately nine out of every 10 diamonds processed globally.
The Indian gems and jewellery sector, which ranks as the country’s third-largest export to the United States after engineering and electronic goods, employs millions and has long been a key part of India’s export economy. However, this crucial sector has already been hit by weakening demand from China, with exports dropping by 14.5 per cent in the 2023-24 fiscal year, further exacerbating concerns about future performance.
Industry leaders are hoping that ongoing talks between India and the United States may yield a trade deal that could help cushion the blow. “We’re pretty hopeful that India could land a trade deal with the U.S. in the next few months. So, we just need to push through this tough phase for a little while longer,” said Shaunak Parikh, vice chairman of the Gem and Jewellery Export Promotion Council (GJEPC).
Trump’s 26 per cent tariff on Indian exports
The U.S. has imposed a 26 per cent reciprocal tariff on Indian exports as part of President Donald Trump’s broader trade policy aimed at reducing the U.S. trade deficit. The tariff was part of a larger set of measures, which also includes a 10 per cent baseline tariff on all imports and higher duties on certain countries, such as 34 per cent on China and 46 per cent on Vietnam.
The reciprocal tariffs on India are a direct response to what the U.S. government describes as India’s “uniquely burdensome” non-tariff barriers, including currency manipulation, which it claims hinder U.S. exports by at least USD 5.3 billion annually.
Trump explained the tariff as a measure to address the trade imbalance between the two countries.
“They (India) are charging us 52 per cent and we charge almost nothing for years and years and decades,” Trump said while announcing the tariffs on Thursday.
The White House said that the 26 per cent tariff would remain in effect until it was determined that the “threat posed by the trade deficit and underlying non-reciprocal treatment is satisfied.”
