Diamond industry cuts output amid US tariff concerns

Surat: The diamond cutting and polishing industry in Surat has been reducing its output as orders from and deliveries to the US have stopped completely, ahead of the 27% reciprocal tariff coming into force on April 9. Manufacturers and businesses are adopting a wait-and-watch approach until the markets for the US stabilize.
Exporters from India and importers in the US are not ready to take responsibility for payment of the tariff. Importers in the US contractually obliged to pay customs duties have instructed exporters in India to halt supply due to the massive tariff increase. Cut and polished diamonds that were to be sent back to India from the US for replacement or processing have also not been shipped. Importers have instructed manufacturers in India to halt production on placed orders.
"We put our operations that dealt with orders from the US on hold. We are observing the situation. The scenario will be clear in a few weeks and we will take decisions accordingly," said Lalji Patel, chairman of Dharmanandan Diamonds.
The US market is very important for India's gem and jewellery industry and Surat in particular. Of the $32 billion in exports from India in 2023-24, over 30%, around $10 billion, was to the US. The gems and jewellery sector contributes about 15% to India's merchandise exports. Of the gems and jewellery exports, cut and polished diamonds account for over 30%.
"The market had been showing signs of improvement but trade has halted due to the tariff issue. The situation is likely to remain the same for a while and we have stopped business related to the US market," said Vallabh Lakhani, chairman, Kiran Gems.
Of every 10 diamonds polished in the world, nine are polished in Surat and at subsidiary centres in Gujarat. Due to the halt in orders and deliveries to the US, production will also fall and this will lead to a loss of work for diamond artisans. There are about 8 lakh workers employed in diamond cutting and polishing.
"A way will be found out over the next few weeks. The industry is otherwise in a stable condition at present and cut and polished diamonds were supplied according to orders before the tariff came into force," said Kirit Bhansali, chairman, Gem and Jewellery Export Promotion Council (GJEPC).