Will Tariffs Imposed by Trump jeapordize World’s Chief Diamond Cutter? | International Trade

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For Kalpesh Patel, the Diwali festival, celebrated across India, could potentially spell the end for his eight-year-old diamond cutting and polishing unit.
The 35-year-old employs around 40 workers who transform raw diamonds into perfectly polished gems for exports at his small factory in Surat, located in the western Indian state of Gujarat.
His business has faced numerous challenges in recent years; however, US President Donald Trump’s substantial 50 percent tariffs on imports from India may be the final blow for his business, part of a struggling natural diamond industry, he stated.
“We still have some orders for Diwali and will try to complete them,” Patel told Al Jazeera.
Diwali, India’s largest festival, usually sees a significant increase in domestic sales of goods. But orders might be canceled due to high tariffs in the US, potentially leading to the shutdown of the business before the festival, according to Patel.
He is among the 20,000 small and medium traders in Surat, known as the “Diamond City of India,” together responsible for processing 14 out of every 15 natural diamonds produced worldwide.
India exported cut and polished gems worth $4.8bn to the US in the 2024-25 financial year, which ended in March. That accounts for more than a third of India’s total exports of cut and polished diamonds, amounting to $13.2bn during the same period.
A Kolkata-based diamond exporter, Dimpal Shah, stated that orders have already started being canceled, citing high tariffs. This is the worst phase of her two-decade-old career in diamonds.

US Imposes Penalty

A 25 percent reciprocal tariff on all Indian goods, announced by Trump on April 2, came into effect on August 7, after negotiations between the two countries failed to yield a trade deal by then. Negotiations are ongoing.
Additionally, on August 6, Trump announced an extra 25 percent tariff, bringing the total to 50 percent. This additional tariff, set to take effect from August 27, is a penalty for India’s continued purchase of Russian oil, as the US tries to pressure Moscow into a ceasefire in Ukraine.
For the gems industry, already facing a pre-existing 2.1 percent tariff, the effective rate now stands at 52.1 percent.
According to Ajay Srivastava, the founder of Global Research Trade Initiative (GTRI), a trade research group, the Trump government’s additional tariff hike is an example of “hypocrisy,” noting that the US continues trading with Russia and China—Russia’s largest oil buyer—faces no similar penalty.
India supplies nearly all of the world’s cut and polished diamonds, produced in small units across the state of Gujarat [Photo courtesy Ramesh Zilriya, president of the state’s Diamond Workers Association]

Diamond Sector Badly Hit

Over 2 million people are employed in diamond polishing and cutting units in Surat, Ahmedabad, and Rajkot cities in Gujarat — many have already faced salary cuts in recent years due to the COVID-19 pandemic and Russia’s full-scale invasion of Ukraine.
Rough diamonds from Russia have historically been a major source of raw diamonds.
Zilriya, the president of Gujarat’s Diamond Workers Union, claimed that 80 diamond workers have died by suicide over the past two years due to the economic crisis.

Decline in Exports

In the 2024-25 financial year, India imported rough diamonds worth $10.8bn, a 24.27 percent decline from the $14bn imported in 2023-24, according to GJEPC statistics.
Decline in exports of cut and polished natural diamonds has also been observed, decreasing by 16.75 percent, with exports down to $13.2bn in 2024-25 compared to $16bn in the previous year.

A Domestic Solution?

Traders advocate the need to increase domestic demand for diamonds and diversify into new markets.
A stronger domestic market “would not only contribute to the local economy, but would also create jobs for several thousands of people,” stated Radha Krishna Agrawal, the director of Narayan das Saraf Jewellers in Varanasi city, in the northern state of Uttar Pradesh.
Bhansali said that the domestic gems and jewellery market was growing, expected to reach $130bn in the next two years, up from $85bn at present. The industry is also exploring new markets, including Latin America and the Middle East.


Source: https://www.aljazeera.com/features/2025/8/13/will-trumps-india-tariffs-shut-down-worlds-biggest-cut-diamond-supplier?traffic_source=rss