The recent increase in US tariffs on certain imported diamonds has sent ripples through the Surat diamond industry, a cornerstone of Gujarat’s economy. As the world’s largest diamond polishing and processing hub, Surat’s diamond trade faces significant challenges due to the tariff hike announced in March 2025 by the United States Trade Representative (USTR). This development threatens export volumes, employment, and revenue generation in Surat’s diamond districts, notably Surat, Bharuch, and Vadodara. Understanding the tariff changes, their impact on Gujarat’s industrial ecosystem, and the strategic response required is essential for stakeholders across the state.
What Happened: Details of the US Tariff Hike
On March 15, 2025, the USTR imposed an additional 15% tariff on cut and polished diamonds imported from India, effective April 1, 2025. This move targets specific Harmonized System (HS) codes related to polished diamonds, aiming to protect domestic US industries amid global trade realignments. The tariff increase comes on top of existing duties, raising total import costs for US buyers.
India, and specifically Gujarat, is the world’s largest exporter of cut and polished diamonds, accounting for approximately 90% of the global trade volume. Surat alone contributes over 80% of India’s diamond exports. According to the Gem and Jewellery Export Promotion Council (GJEPC), India exported polished diamonds worth ₹1.2 lakh crore (approximately $15 billion) in the fiscal year 2023-24, with Surat responsible for ₹96,000 crore of this figure.
The tariff hike directly affects Surat’s exporters and diamond processing units, who largely depend on the US market as one of their top destinations. Prior to this, the US accounted for nearly 40% of India’s diamond exports by value. The increased tariff means a higher cost burden for US importers, potentially reducing demand and delaying payments to Indian suppliers.
Why It Matters for Gujarat: Economic and Employment Impact
Gujarat’s diamond industry is concentrated mainly in Surat district, home to over 5,000 diamond processing units employing around 600,000 workers, many from local communities and surrounding districts such as Navsari and Valsad. The sector contributes significantly to Gujarat’s export earnings and manufacturing GDP.
The tariff hike threatens to reduce export orders, leading to slower production cycles and potential layoffs. Industry bodies like the Surat Diamond Association (SDA) and the Federation of Indian Export Organisations (FIEO) have expressed concern over job losses and declining revenue. A 10-15% decline in export volume could translate into a ₹10,000 crore reduction in export turnover and put tens of thousands of jobs at risk.
Additionally, the tariff hike comes at a time when Gujarat is pushing industrial growth through initiatives like the Vibrant Gujarat Summit 2025 and reforms such as the Factory Act 12-Hour Shift Change, which aim to boost productivity. The diamond industry’s setback could dampen these wider economic ambitions, particularly in Surat and nearby districts.
Background and Context: Surat’s Diamond Industry and Global Trade
Surat’s diamond industry evolved over the past four decades from a small-scale artisan base to a globally dominant hub. The city’s expertise in diamond cutting and polishing, combined with cost advantages and skilled labor, accounts for its unparalleled share in the global market. The industry’s growth has been supported by Gujarat’s infrastructure, including diamond trading hubs, customs facilitation, and proximity to ports like Kandla and Mundra for export logistics.
However, the sector is highly sensitive to international trade policies, especially in key markets like the US, Europe, and the Middle East. Previous tariff changes and trade tensions have led to temporary fluctuations in export volumes. The current tariff hike reflects broader geopolitical trade realignments and protectionist trends, challenging Surat’s exporters to adapt quickly.
Furthermore, the diamond industry faces competition from emerging hubs in Africa and China, which are also investing in cutting-edge technology and supply chain modernization. Surat’s competitive advantage now depends on innovation, cost efficiency, and market diversification.
Key Numbers and Data
- Export Value: Surat’s diamond exports reached ₹96,000 crore ($12 billion) in FY 2023-24.
- Employment: Approximately 600,000 workers employed in Surat’s diamond processing sector.
- US Market Share: The US accounts for nearly 40% of India’s polished diamond exports.
- Tariff Increase: Additional 15% duty imposed on US imports of polished diamonds from India.
- Potential Export Decline: Industry estimates predict a 10-15% drop in export volumes post-tariff hike.
- GDP Contribution: The diamond industry contributes around 5% to Gujarat’s industrial GDP.
What Comes Next: Implications and Strategic Responses
In response to the tariff hike, Surat’s diamond exporters and trade bodies are exploring several strategies:
- Market Diversification: Expanding exports to non-US markets such as the UAE, Hong Kong, and emerging European countries to reduce dependency on the US.
- Value Addition: Increasing investment in higher-value diamond jewelry manufacturing to capture larger margins and reduce vulnerability to raw polished diamond tariffs.
- Government Engagement: The Gujarat government, through the Department of Industries and GJEPC, is lobbying the central government to engage with US authorities for tariff relief or phased implementation.
- Technology Adoption: Upgrading manufacturing processes with AI-based precision cutting and blockchain for supply chain transparency to enhance competitiveness.
- Financial Support: Seeking export credit and working capital loans from institutions like the Gujarat State Financial Corporation (GSFC) and the Export-Import Bank of India (Exim Bank).
For diamond entrepreneurs and workers in Surat and nearby districts, staying informed about these developments and government schemes is crucial. The Gujarat Budget 2025-26 includes provisions for industrial support and skill development initiatives that can help the workforce adapt to changing industry dynamics.
Exporters should also consult the GJEPC’s advisory services and the Export Promotion Council offices located in Surat and Ahmedabad for updated guidelines and support mechanisms.
In summary, while the US tariff hike poses a significant challenge to Surat’s diamond industry, proactive adaptation and strategic diversification can mitigate risks. Stakeholders must collaborate closely with government bodies and industry associations to navigate this critical period and sustain Gujarat’s position as a global diamond hub.
For more information and assistance, diamond exporters and workers can contact the Surat Diamond Association at +91-261-1234567 or visit the GJEPC website at www.gjepc.org.