Gems & jewellery exporters jittery over steep hike in US reciprocal tariff

The reciprocal tariff threat has turned out to be real, and the gems and jewellery sector is seen among the worst affected. India’s diamond industry views the reciprocal tariff as a significant burden on Indian exporters. Exports will be badly hit in the next couple of months until the cost impact is analysed by US consumers and Indian exporters, said industry players.

 

According to a late evening circular issued by the Gem & Jewellery Export Promotion Council (GJEPC) to its members, the US duty increase will occur in two phases. A 10 per cent duty increase on all items imported into the US will be effective from April 5, over and above the presently applicable duty. In the second phase, it will increase by another 17 percentage points effective April 9, due to country-specific import duty on Indian goods. Effectively, the duty rates will go up by 27 percentage points over and above the current rates.

 

As a result, the effective rate for cut and polished diamonds will ultimately be 27 per cent from April 9, as against nil currently. Gold jewellery exports from India will attract 32–34 per cent, depending upon the respective items’ heading (code) numbers, and silver jewellery will attract 32–40.5 per cent from April 9. The council's circular includes changes in 13 such items.

 

GJEPC, in a statement, said, “In the long term, we foresee a reshaping of global supply chains. In the short run, we anticipate challenges in sustaining India’s current (annual) export volume of $10 billion to the US market. We urge the Government of India to progress the bilateral trade agreement between India and the US, as it would be crucial in navigating the tariff issues and securing the long-term interest of the sector.”

 

US President Donald Trump slapped India with some of the highest tariff rates imposed on any major US trading partner, saying his good personal ties with Prime Minister Narendra Modi did not affect his decision. The duty imposed on imports from India is higher than the 20 per cent levy for the European Union, 24 per cent for Japan and 25 per cent for South Korea. India’s levy, however, was far lower than China’s rate of at least 54 per cent, and regional manufacturing rival Vietnam, which was hit with a 46 per cent duty.

 

Colin Shah, managing director, Kama Jewelry and former chairman of GJEPC, said, “It's a big setback for India as the US has announced retaliatory tariffs. The (domestic) gems and jewellery sector will be the most affected by import tariffs. The US is one of India's largest jewellery export markets, accounting for almost 30 per cent of the share of Indian jewellery exports to the US.”

 

According to data provided by the GJEPC, the overall gross exports of gems and jewellery stood at $25.73 billion, a decline of 13.43 per cent in the April '24 to February '25 period, while India imported gems and jewellery worth $17.5 billion in this period, a 13.31 per cent fall year-on-year.

 

The impact of US reciprocal duty will be hard on domestic diamond exporters as well as trade and cutting-polishing units, who are already passing through very challenging times.

 

Paul Zimnisky, a New York-based diamond analyst, is hopeful that India will work with the US on this (duty rates). He told Business Standard that, “High tariff on imports will likely result in higher prices for US consumers. It will have an impact on the US downstream as well as the Indian midstream. There are lots of moving parts. I expect a continuous news flow in the coming days.”

 

On a micro level, it will certainly complicate the trade’s supply chains, especially in the short term, he added.

 

“However, if the US ends up benefiting from this, then it could help the consumer in the medium term. For example, if middle-class income tax is reduced or if a ‘DOGE dividend’ is paid out, it could certainly stimulate jewellery consumption here. And the US represents upwards of 55 per cent of global end-consumer diamond demand,” Paul said.

 

Sharp pullback in gold & silver prices

 

International gold prices fell sharply from a high of $3,167 to $3,054 before trading in the evening at $3,070 per ounce. In India, on the MCX, gold June contract prices fell by 1.73 per cent or by Rs 1,518 to Rs 89,210 per 10 grams.

 

Nigam Arora, a US-based algorithm analyst and author of The Arora Report, said, “Tariffs imposed by President Trump are worse than the expectations that were discounted in the markets. The high tariff, however, will be positive for gold once it stabilises from the pullback seen today because the new tariffs raise uncertainty. Gold benefits from uncertainty.” Nigam sees the price scenario changing if the US Federal Reserve cuts rates. However, in the absence of new developments, gold should rise to $3,300–3,500.

 

Negative for crude oil

 

Nigam added, “The new tariffs are negative for oil. The reason is the new tariffs will reduce global growth. Lower global growth means less oil consumption. In the absence of new developments, WTI crude can go down to $66 a barrel.”