Surat’s diamond industry is facing a significant crisis after the US announced a new 25% tariff on imports from India. This news comes just months before the critical Christmas season, which is vital for diamond sales. In fact, nearly half of the annual international sales occur during this festive period. With the new tariffs, many American buyers have already put their orders on hold, creating uncertainty in the market.
Experts warn that the new tariffs will severely impact the export of non-industrial diamonds, which are primarily used in jewellery and investments. In 2024, India accounted for a staggering 68% of the US’s diamond imports by volume and 42% by value, totalling $5.79 billion, as reported by the Gems & Jewellery Export Promotion Council (GJEPC). In contrast, Israel, the second-largest supplier, faces a significantly lower tariff of only 19%.
Surat’s diamond exporters are already feeling the effects, with exports to the US reportedly dropping by 25% in recent years. Additionally, factory production has decreased by up to 35%. The new 50% tariff, effective August 27, could exacerbate these declines, potentially resulting in the loss of approximately 125,000 jobs across Gujarat, Maharashtra, and Rajasthan.
Surat processes about 80% of the world’s polished diamonds and employs over 600,000 skilled workers, many of whom are migrants from Saurashtra. The city’s 5,000 diamond units, alongside Mumbai’s trade hubs, are expected to suffer the most from these new tariffs. Competing countries like Turkey, Vietnam, and Thailand benefit from much lower US tariffs of 15-20%, making Indian diamonds less competitive in the US market.
Industry leaders are worried about order cancellations, blocked working capital, and a shrinking market share. While some exporters are looking to new markets such as the UK—where duties on Indian gems and jewellery have been scrapped—the US remains an irreplaceable market due to its high demand.
The global economic slowdown has already forced major companies like De Beers to cut rough diamond production by 36%. Many factories in Surat have responded by reducing working hours or shifting to lab-grown diamonds, which are cheaper but also facing falling prices.
Despite this daunting situation, some industry veterans remain optimistic. They believe that US buyers will still purchase diamond jewellery, albeit smaller pieces, during the Christmas season. Industry bodies have called on the Indian government to provide targeted reimbursements to help offset a portion of the US tariffs and protect jobs until the end of the year.
The GJEPC has indicated that the sudden increase in tariffs could erode India’s market share in the diamond industry, leading to cancellations of existing orders and affecting employment, especially in small and medium-sized enterprises. They are particularly concerned about the potential for trade rerouting through lower-tariff countries, which could further undermine Indian exports.
The United Kingdom’s recent decision to eliminate duties on imported gems and jewellery from India offers a glimmer of hope for diamond merchants looking to explore new markets. However, the US market’s importance cannot be overstated, as it remains the largest destination for Indian diamond exports.
As the deadline for the new tariffs approaches, Surat’s diamond industry stands at a crossroads. The next few months will be crucial in determining the future of this vital sector. Industry stakeholders are hopeful that negotiations may lead to a more acceptable tariff structure, but the uncertainty looms large over an industry that is already reeling from multiple challenges, including geopolitical tensions and competition from lab-grown diamonds.
In conclusion, the diamond industry in Surat is facing unprecedented challenges due to the new US tariffs. With significant job losses anticipated and a decline in exports, the situation remains critical. The hope is that through collaboration and negotiation, the industry can find a way to navigate these turbulent times and emerge stronger.