Trump's 26% Tariff on Indian Gems & Jewellary : A Major Blow to India's $10 Billion Export Market

Introduction

The U.S. government, under President Donald Trump, has announced a 26% tariff on Indian gems and jewellery imports, a move that has sent shockwaves through India’s export-driven industry. This decision, which raises the existing 6% duty to a staggering 34%, threatens to reduce India’s $10 billion gem and jewellery exports to the U.S. by 30- 50%, disrupt supply chains, and lead to widespread job losses in a sector heavily reliant on manual labor.

As tariffs disrupt traditional exports, many Indian jewellers are turning to lab-grown diamonds as a sustainable and cost-effective alternative.

In this blog, we analyze:

●Why the U.S. imposed this steep tariff

●The immediate and long-term impact on India’s gem & jewellery industry

●How businesses are reacting and preparing for the fallout

●Possible solutions and government interventions to mitigate losses

Why Did the U.S. Impose a 26% Tariff on Indian Gems & Jewellery?

1. Reciprocity in Trade: Trump’s "America First" Policy The Trump administration has long advocated for reciprocal tariffs, meaning if a country imposes high duties on U.S. goods, the U.S. will respond in kind. India currently levies heavy import duties on American products, including:

●Harley-Davidson motorcycles (50%)

●Whiskey (150%)

●Apples and almonds (up to 100%)

●The new 27% tariff is seen as a retaliatory measure to pressure India into reducing its own trade barriers.

2. Protecting U.S. Jewellery Manufacturers : The move also aligns with Trump’s protectionist trade policies, aimed at boosting domestic manufacturing. By making Indian gems and jewellery more expensive, the U.S. hopes to encourage buyers to shift to locally sourced or alternative markets.

3. Industry Was Expecting a Hike—But Not This High Indian exporters anticipated a 10-15% increase, but the 27% jump has caught them off guard.

"We were preparing for a 10-15% hike. But 27% is too high a rate. This will lead to a steep hike in cost for these Indian products for US buyers, which in turn would affect demand."

— Colin Shah, Founder & MD, Kama Jewelry

Immediate Impact on India’s Gem & Jewellery Industry

1. Sharp Decline in U.S. Exports (30-50% Drop Expected)

●India exports $10 billion worth of gems and jewellery to the U.S. annually, making up nearly one-third of its total exports in this sector.
●With a 34% total tariff, Indian products will become significantly more expensive, leading to lower demand.
●Industry experts predict a 30-50% drop in exports unless a bilateral agreement is reached.

2. Rising Costs for U.S. Buyers & Retailers

●Jewellery prices in the U.S. could surge by 20-30%, making Indian diamonds and gold jewellery less competitive.
●U.S. retailers may shift sourcing to countries like Belgium, Israel, or Thailand to avoid high tariffs.

3. Job Losses in India’s Labour-Intensive Sector

●Surat, Mumbai, and Jaipur—India’s gem and jewellery hubs—employ millions of workers in diamond cutting, polishing, and jewellery making.
●A decline in orders could lead to large-scale layoffs, especially among small and medium enterprises (SMEs).

Long-Term Consequences for the Industry

1. Diversification of Export Markets

●Indian exporters may reduce dependence on the U.S. and focus on China, the EU, and the Middle East.
●Free Trade Agreements (FTAs) with UAE and Australia could help offset losses.

2. Increased Production Costs & Lower Profit Margins

●To remain competitive, Indian manufacturers might cut costs via automation, but this could further reduce jobs.
●Smaller exporters may struggle to survive, leading to industry consolidation.

3. Potential Retaliation from India

●India could impose counter-tariffs on U.S. goods, escalating trade tensions.
●The U.S.-India trade deficit ($38 billion in 2023) may widen further.

How Can the Indian Gem & Jewellery Industry Adapt?

1. Government Intervention & Trade Negotiations 

●Diplomatic talks to negotiate lower tariffs or exemptions.
●Export incentives such as tax rebates, subsidies, or easier credit access for SMEs.

2. Market Diversification Strategies

●Boost exports to China, UAE, and Europe where demand remains strong.
●Leverage e-commerce platforms to reach global buyers directly.

3. Cost Optimization & Branding

●Invest in automation to reduce reliance on manual labor.
●Focus on high-margin segments like bespoke jewellery and lab-grown diamonds.

Industry Reactions & Warnings

GJEPC’s Statement: A "Significant Burden"

The Gems & Jewellery Export Promotion Council (GJEPC) has expressed deep concern:

"The Trump administration's announcement of a reciprocal tariff on Indian gem and jewellery exports to the U.S. would be a significant burden on Indian exporters and American consumers alike."

Exporters Fear a Prolonged Slowdown

●Many fear that without quick policy adjustments, the industry could face:
●Reduced global competitiveness
●Loss of market share to rival countries
●Long-term damage to India’s position as a jewellery hub

India’s growing lab-grown diamond industry offers a strategic way forward amid U.S. tariff pressures.

Conclusion: What’s Next for India’s Gem & Jewellery Trade?

The 26% U.S. tariff poses a serious challenge, but it also pushes India to:

● Diversify its export markets

● Improve cost efficiency 

● Strengthen trade negotiations Key Takeaways

● U.S. tariff jumps from 6% to 34%, making Indian gems & jewellery more expensive.

● Exports to the U.S. could drop by 30-50%, risking millions of jobs.

● India must explore new markets and seek government support to mitigate losses.

● Retaliatory tariffs or bilateral talks could shape future U.S.-India trade relations.