India's gems and jewellery exports to US halted after 50% tariff hike

The US tariff hike on gems and jewellery exports from India has halted shipments, slashed market share and may lead to 1.25 lakh job losses in major export hubs

The 50 per cent tariff announced by the United States (US) on India’s gems and jewellery export has halted its shipment, leading to a blow to this employment-intensive industry.  

 

The first 25 per cent reciprocal tariff came into force on August 7, taking the duty to 31.5 per cent (including the 5.5-7 per cent “most favoured nation” duty on jewellery, which was applicable even before April) for jewellery. 

 

On August 27, another 25 per cent will be added, taking the effective rate to 55.5 per cent.

 

Exports to the US slowed in April-June (Q1) after the 10 per cent reciprocal tariff the country imposed in April.

 

In FY25, gems and jewellery exports to the US were $9.2 billion, while exports in the first quarter of FY26 were only $1.5 billion.

 

As a result, the share of India’s exports of gems and jewellery to the US has fallen from 32.2 per cent to 22.9 per cent. However, the United Arab Emirates’ (UAE’s) share has increased in Q1 from 27.4 per cent to 34.4 per cent.

 

Sources in the industry said the routing of exports from the UAE had increased in the past few months.

 

Also, exporters had shipped $500 million worth of gems and jewellery to the US a week before the 10 per cent duty came into force in April, while some exports were made last week at the 10 per cent reciprocal tariff. 

 

In the first quarter of FY26, India’s gross exports of gems and jewellery fell 5.4 per cent to $6.48 billion compared to the previous year, according to the Gem & Jewellery Exports Promotion Council (GJEPC) data, while gross imports declined 2.3 per cent to $5.34 billion.

 

Kirit Bhansali, chairman, GJEPC, said: “The US is our (India’s) single largest market, accounting for over $10 billion — nearly 30 per cent of our industry’s global trade. A blanket tariff of this magnitude is severely devastating for the sector.”

 

Exports from the SEEPZ Special Economic Zone have been directly impacted as 85 per cent goes to the US and this will affect 50,000 jobs. For cut and polished diamonds, half India’s exports are US-bound. With the revised tariff hike, the industry may come to a standstill, placing pressure on every part of the value chain — from small karigars to large manufacturers, Bhansali added.

 

High duty has affected India’s export competitiveness. Competing manufacturing hubs such as Turkey, Vietnam, and Thailand attract lower tariffs of 15 per cent, 20 per cent, and 19 per cent, respectively, and the tariff on imports from the UAE is just 10 per cent.

 

Bhansali said: “We are concerned about the possibility of trade rerouting through low-tariff destinations such as Mexico, Canada, Turkey, the UAE, or Oman — undermining the spirit of legitimate trade and impacting transparency.”

 

The council says export rerouting is not transparent. However, trade finds its place. A Surat-based diamond processor said as of now the increased cutting and polishing business from lab-grown diamond producers had partly replaced the loss of rough diamond cutting and polishing and with a marginal loss in income, jobs had largely not been affected.

 

Banks are concerned about their loans to exporters. 

 

The GJEPC said a significant reduction in export from the sector might destroy about 125,000 jobs in four-five months.

 

“We anticipate that there will be a loss of approximately $3 billion to our workforce. The cities of Surat, Mumbai and Jaipur are likely to be hit the hardest; the reduced exports and job losses will have a cascading effect on the economy, affecting livelihoods and revenue generation.”

 

The GJEPC expects to make good part of this loss because the domestic market is growing fast. The domestic market has been estimated at $85 billion and is expected to grow to $130 billion in two years.

 

This domestic growth offers some cushion, particularly for the diamond sector.

 

The body further said: “The GJEPC is exploring new markets. The upcoming Saudi Arabia Jewellery Exhibition is one such initiative aimed at opening fresh avenues in emerging regions and diversifying India’s export destinations.”