US tariff brings the hammer down on already beleaguered diamond industry

Surat: The Surat diamond industry has been reeling under a series of crises in recent years. Just as it was recovering from the pandemic, the Russia-Ukraine war disrupted supplies of rough diamonds after sanctions on Russian exports. Soon after, the Israel-Palestine conflict added to the uncertainty. The latest blow has come in the form of unprecedented tariffs imposed by the Donald Trump-led US administration.

Experts say that the tariff hike is reported to be hurting not just Surat’s famed diamond industry but India’s overall $32-billion gems and jewellery export market. According to a report by the Gems and Jewellery Export Promotion Council (GJEPC), India exported gems and jewellery worth $11.58 billion to the US in 2024, accounting for about 34% of its global exports.  

The report stated that India exported cut and polished diamonds worth $7,972.16 million to the US in 2022–23, which fell to $5,601.24 million in 2023–24. Until now, the tariff applicable on these exports was zero.  With the US being India’s single largest market, the reciprocal tariff hike is expected to have a significant impact on the industry. 

Standing at the lowest level of the value chain and its reliance on global players, both for sourcing raw materials and for sales of final products, the diamond workers and medium and small scale factories are going to be worst affected. The US accounts for 32% of total export followed by China, where also the demand has been slowing down. The situation has led the exporters to scramble for newer pastures. There is a buzz going on in the market that big firms or exporters can shift to countries where tariffs are lower

Surat’s diamond cutting and polishing industry remains highly unorganised which makes it difficult to assess how it has affected the artisans. Experts say natural diamond units have laid off thousands of workers in recent years, many of whom were absorbed by lab-grown diamond firms but at 35–45% lower salaries. The latest blow is likely to hurt the industry further as companies may slash the artisans’ salaries further. 

“The jewellery sector across the world has been facing a slowdown for the past four years. During this period, our exports fell by over 40%, dropping from a record $42 billion to $24 billion annually. The industry had hoped for a recovery, but the new tariff is set to hurt more,” said Dinesh Navadiya, chairman of Indian Diamond Institute, Surat.

Babubhai Dholiya, 70, has been in the diamond trade since his teenage years. Like lakhs of others in Surat, he began as a labourer, cutting and polishing rough diamonds. After nearly a decade, he set up his own factory, having learned the tricks of the trade. Though barely literate, he soon began travelling to countries like Belgium to procure batches of rough diamonds.

“I had about 150 to 200 workers in my factory in the Varachha area. But everything changed in 2008 with the global slowdown. It hit me so hard that by 2010 I had to shut down my factory. Since then, I have only been trading. With my experience, I can say that what the industry is facing now is somewhat similar to 2008. I used to handle business worth around Rs 50 lakh a day until 2020, but after the pandemic my business dropped to about Rs 5 lakh a day,” Dholiya told DH from his modest office in Mini Bazar, a bustling diamond trading hub in Varachha, home to the majority of Surat’s diamantaires. The overall situation in the market remains of uncertainty and apprehension over how the tariff war is going to be played out in immediate future. 

According to Bhavesh Tank, vice-president of the Diamond Workers’ Union, uncertainty looms at the future of workers as factory owners may sack workers in big numbers.  A former polisher himself, Tank lost his job three years ago and now runs a loan consultancy while advocating for workers’ rights.

However, some also view the crisis as an opportunity to explore under-tapped markets in Europe and the Middle East. They argue that the industry’s over-reliance on the United States, the world’s largest market for polished diamonds, has made it vulnerable, and that the time has come to diversify exports.

Acknowledging the crisis Jayanti Savaliya, regional president of GJEPC, told DH that the imposition of tariff will create further trouble for the industry. He said that the crisis has also given the Indian traders an opportunity to start exploring in other markets where exports have been dismal such as European and Middle East countries. He added that “there is a crisis and it is going to impact every stakeholder significantly in the days to come but this is also a time to think in some positive direction and bring changes.”