Rising US tariffs push India’s diamond sector to consider relocation

India’s diamond exports have already plunged to a two-decade low due to weak Chinese demand, and the industry now faces an additional threat from rising U.S. tariffs under President Donald Trump.

The United States accounts for nearly a third of India’s $28.5 billion in annual gem and jewellery shipments, Caliber.Az reports via foreign media.

In Surat, the global hub where more than 80% of the world’s rough diamonds are cut and polished, orders are beginning to dry up as the looming tariffs shake buyer confidence. Smaller exporters have limited options to mitigate the impact, while some larger firms are considering relocating part of their operations to countries such as Botswana, which faces a lower 15% U.S. tariff. India’s current 25% tariff on exports is set to double on August 27.

“We are in a wait-and-watch mode until the end of August, but may increase production in Botswana if this continues,” said Hitesh Patel, managing director of Dharmanandan Diamonds, noting that the U.S. tariffs could cut the company’s annual revenue by 20–25%.

Shaunak Parikh, vice chairman of the Gem and Jewellery Export Promotion Council (GJEPC), said the industry is also responding to slower demand by reducing working days and hours. At the Surat Diamond Bourse, more than 4,700 offices have been sold, yet fewer than 250 are currently in use, with several companies reconsidering relocation plans.

A Mumbai-based diamond firm owner who purchased space at the bourse last year said relocation plans have been shelved. “U.S. tariffs have already shaken our business, and we don’t want the added hassle of moving from Mumbai to Surat,” he said.

In December 2023, Prime Minister Narendra Modi inaugurated the Surat Diamond Bourse—a 6.7 million square-foot complex surpassing even the Pentagon—calling it a symbol of “new India’s strength and new resolve.”

The sprawling facility, with nine interconnected towers of 15 floors each, houses banks, customs offices, secure vaults, and a jewellery mall, designed to serve as a one-stop hub for the global diamond trade.

August and September typically mark a production surge in Surat ahead of U.S. Christmas and New Year orders. This year, many artisans remain uncertain about whether work will be available. “Demand has slumped so badly that the diamond packets I sold for 25,000 rupees ($286) last year now barely fetch 18,000,” said Shailesh Mangukiya, who runs a cutting and polishing unit in Surat. He added that his staff strength has been halved to 125 workers.

GJEPC’s Parikh warned that without a trade deal to lower U.S. tariffs, between 150,000 and 200,000 workers could lose their jobs. Stung by higher tariffs, American buyers are likely to source diamonds from Israel, Belgium, and Botswana.

Indian exporters are trying to boost sales in Asia, Europe, and the Middle East to offset potential losses in the U.S., but finding new buyers has proven challenging. The industry is cutting rough diamond purchases, operating with minimal inventories to preserve cash flow, and smaller units are offering deep discounts to stay afloat.

The only positive note is India’s domestic market. Demand for diamonds in India, which recently surpassed China as the world’s second-largest market, continues to grow, said Hitesh Shah, a partner at Venus Jewel, a supplier to Tiffany & Co. and Harry Winston.

“Our sales for the last 10–15 days have slowed slightly, but the loss of American demand is being offset by good domestic demand,” he said.

By Tamilla Hasanova