US Tariffs Hit Indian Gems and Jewellery Sector Hard
The recent announcement of a 27% tariff on Indian gems and jewellery by the United States, effective April 2025, has sent shockwaves through the industry. This significant policy shift threatens to impact over $11 billion in exports, as the US is India’s largest market for these products. Previously, Indian cut and polished diamonds faced no tariffs in the US, while India imposed a 5% tariff on similar imports. The new tariff regime is expected to have far-reaching consequences for an already struggling sector.
Impact on Exports and Market Dynamics
India’s gems and jewellery sector heavily relies on exports, with the US accounting for a substantial portion. In the fiscal year 2023-2024, India’s total exports in this sector reached $32.85 billion, with $9.95 billion directed to the US, representing 30.29% of the sector’s total exports. In contrast, the US imported $89.12 billion worth of gems and jewellery globally in calendar year 2024, with India contributing 12.99% of that total. This dependency on the US market means that any changes in tariff policies can significantly affect the sector’s performance and profitability.
The introduction of these tariffs comes at a time when the Indian gems and jewellery sector is already facing challenges, including changing consumer preferences and increased competition from other countries. The potential for a decline in exports due to the new tariffs raises concerns about the long-term sustainability of the industry.
Challenges Facing the Sector
The Indian gems and jewellery industry has been grappling with various challenges even before the tariff announcement. Factors such as weak demand from key markets like China, operational difficulties, and high import duties on gold jewellery have compounded the sector’s struggles. Additionally, the rise of lab-grown diamonds has shifted consumer preferences, further impacting traditional diamond sales.
The imposition of US tariffs adds another layer of complexity, potentially leading to job losses and reduced profit margins. The sector has already experienced a decline, with exports dropping by 14.5% to $32.3 billion in the 2023-24 fiscal year. Projections indicate a further decrease to $8.6 billion in 2024-25, highlighting the urgent need for strategic responses from industry stakeholders.
The Path Forward: Strategic Negotiations Needed
In light of these challenges, it is crucial for the Indian gems and jewellery sector to engage with both the Indian and US governments to negotiate favorable trade terms. Addressing the adverse impacts of the new tariffs through strategic negotiations and trade deals will be essential for the sector’s recovery and growth.
Industry leaders emphasize the importance of collaboration between the government and the private sector to mitigate the effects of these tariffs. Support measures and proactive strategies will be vital in ensuring the long-term sustainability of the gems and jewellery industry in India.
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