A Glimmering Crisis: How US Tariffs Threaten Surat’s Diamond Industry

Surat, the global diamond polishing hub responsible for over 90% of the world’s diamonds, faces a crisis due to US-imposed tariffs of up to 26% on gem imports. The US, India’s largest diamond export market, saw a 15% drop in imports, contributing to a 20% decline in India’s global diamond trade. Over 400,000 artisans risk losing their livelihoods. While exploring markets like Dubai and Hong Kong offers hope, uncertainty looms as manufacturers grapple with razor-thin margins and disrupted trade dynamics.

In a bustling alley of Surat, Gujarat, lies an unassuming building whose basement houses one of India’s most prized industries — diamond polishing. Over 20 motorcycles are crammed into the narrow entrance, masking the economic powerhouse within. Inside, rows of artisans, armed with precision tools and magnifying glasses, transform raw diamonds into exquisite shapes like hearts, marquises, and emeralds. This scene typifies Surat, which polishes over 90% of the world’s diamonds, earning its reputation as a global hub for diamond finishing.

Yet, this glittering industry now faces unprecedented challenges. Recent tariff policies introduced by the United States — India’s largest diamond export market — have cast a shadow over Surat’s diamond trade, threatening livelihoods and the city’s economic backbone.

The Impact of Tariffs on a Fragile Industry

Earlier this month, the US administration announced sweeping tariff changes, imposing a 26% duty on gem and jewelry imports from India. While a 90-day embargo on full implementation offers temporary respite, the industry is already reeling from a 10% import tax on major products. Previously, polished and lab-grown diamonds entered the US duty-free, while gold jewelry faced relatively modest taxes of 5–7%. The new rates — climbing to 26–33% — have disrupted trade dynamics and strained decades-old partnerships.

The US, which accounts for 32% of India’s diamond exports, is critical to Surat’s $75.6 billion global diamond trade. However, export data from the Gem and Jewellery Export Promotion Council (GJEPC) reveals troubling trends. Overall, India’s diamond exports shrank by 20.16% year-on-year, with shipments to the US falling by 15% — dropping from $9.82 billion in FY24 to $8.34 billion in FY25.

“Margins in this business are already razor-thin, and these tariffs leave little room for adjustment,” explained Jayantibhai N Savaliya, Gujarat’s regional chairman at GJEPC. He emphasized that uncertainty over the tariffs has put manufacturers and exporters in a precarious position.

Surat’s Workforce Under Threat

Surat’s diamond industry employs over 800,000 skilled artisans, many of whom are now facing an uncertain future. Unit managers warn that prolonged market instability could jeopardize the livelihoods of nearly half the workforce.

One manufacturer noted that the sudden tariff hike has already led to production halts. “Orders were being shipped until April 5, but after the April 9 announcement, importers froze shipments scheduled beyond April 10. Many consignments were outright canceled due to the lack of clarity,” he said.

In a typical month, a small 25-member polishing unit processes about 2,000 carats of diamonds. However, with tariffs potentially reducing demand by 25%, many units may struggle to stay afloat.

Exploring New Markets Amid Uncertainty

With the US market in flux, Surat’s diamond merchants are exploring alternative markets in the Middle East and Asia. Dubai, Hong Kong, and China have emerged as potential trading hubs, thanks to their zero-tariff policies and growing consumer bases.

“We’re looking at markets like Saudi Arabia, Kuwait, and Qatar. Dubai is especially promising, given its role as a global trading hub,” said Rajat Wani, regional director of GJEPC. However, he cautioned that regulatory hurdles, such as certificate of origin requirements, could complicate rerouting efforts.

Merchants are also assessing the domestic Indian market as an alternative, though building new supply chains from scratch presents its own challenges.

A Mutual Dependence

While India’s diamond industry bears the brunt of these tariffs, experts argue that the US also stands to lose. “The US depends heavily on India for affordable, high-quality diamond finishing. They don’t have the infrastructure or skilled labor to match our capabilities,” said Kirtikumar Shah, a veteran diamond trader.

The industry’s thin profit margins — between 3–5% — leave little scope for importers and exporters to share the tariff burden. Retailers in the US will likely face higher prices, potentially shrinking the consumer base for diamonds.

The Road Ahead

Surat’s diamond manufacturers are navigating a storm of uncertainty. As the 90-day embargo period ticks by, the industry’s future remains unclear. While efforts to diversify export markets and boost domestic sales are underway, the question looms: can Surat’s diamond industry withstand this economic blow?

For now, artisans continue to sit shoulder-to-shoulder in dimly lit workshops, polishing the world’s sparkle. But the glittering future once promised by Surat’s diamonds now hangs precariously in the balance.

Key Points Recap:

- US Market Dependency: The US accounts for 32% of India’s diamond exports.

- Tariff Impact: Exports to the US dropped 15% year-on-year.

- Global Demand Decline: India’s diamond exports shrank by 20% overall.

- Workforce at Risk: Over 400,000 artisans in Surat face job uncertainty.

- Exploring New Markets: Dubai, Hong Kong, and Saudi Arabia offer hope for diversification.