US Tariffs and Penalties Challenge India's Diamond Exports

The US market, a significant destination for Indian natural polished diamonds, accounting for 35% of exports in fiscal 2025, is now facing additional hurdles due to recent tariffs and penalties. This development is expected to exacerbate the already observed slowdown in natural diamond demand in the US.

Rahul Guha, Senior Director at Crisil Ratings, highlighted the impact of a 10% tariff on Indian exports announced in April 2025, which reduced the US share in polished diamond exports to 24% in the first quarter of this fiscal from 37% the previous year.

Margins and Market Adjustments

With traditional operating margins of 4-5%, natural diamond polishers have limited capacity to absorb the tariff-induced price increases. Himank Sharma, Director at Crisil Ratings, suggests that miners and retailers may need to share the burden of these price shocks.

Despite efforts to mitigate the impact through sales strategies and limited price reductions, natural diamond export revenues have declined by 17% to USD 13.3 billion, attributed to decreased Chinese demand and competition from lab-grown diamonds (LGD) in the US.

Global Implications and Industry Optimism

As the world's leading diamond exporter, India's current challenges with US tariffs and penalties have raised concerns among stakeholders in the Gems and Jewellery sector, anticipating market disruptions and increased costs for US consumers.

However, industry leaders remain hopeful, pointing to India's diversified trade relationships through recent Free Trade Agreements (FTAs) with the UK, Australia, and the UAE as a buffer against potential long-term impacts.