Diamond polishers in Surat face a rougher grind as US tariffs cut deep

The tariff trap Part-I: The first of a three-part series captures how Surat's diamond industry is coping with tariff uncertainties

A tight alley in the heart of Surat leads to the basement of a worn-down building, where more than 20 motorcycles are crammed wheel-to-wheel, leaving barely any room to walk.

 

The building may look abandoned to a stranger, but a few steps inside the commercial complex reveal a floor that manufactures one of India’s most valuable exports: diamonds.

 

This nondescript diamond polishing unit is packed with 26 artisans seated shoulder-to-shoulder, armed with precision tools and magnifying loupes, facing whirling abrasive plates. These skilled men refer to pages filled with dense grids of numbers to cut raw diamonds into meticulous shapes such as hearts, ovals, emeralds, and marquises.

 

More than nine out of 10 diamonds worldwide are polished in Surat, making it a global hub for diamond finishing.

 

Units like these form the backbone of the city’s industry, which specialises in polishing natural and laboratory (lab)-grown diamonds. Surat’s roughly 5,000 diamond units depend heavily on large export markets such as the US — a country whose tariff policies are making them anxious.

 

“The short-term impact of such tariff structures means that the India-US diamond and jewellery trade will come to a standstill. Everyone goes into wait-and-watch mode since there are multiple aspects to study,” said Rajat Wani, regional director — Surat, Gem and Jewellery Export Promotion Council (GJEPC).

 

Earlier this month, US President Donald Trump announced sweeping reciprocal tariffs on India, levying a 26 per cent duty on gem and jewellery exports to the country.

 

Days after the announcement, he imposed a 90-day embargo on the full implementation of the new tariffs, while still levying a 10 per cent tax on most major imports, throwing sectors like Indian gem and diamond into limbo.

 

Previously, cut and polished diamonds, along with lab-grown ones, did not attract any tariffs, while gold jewellery was taxed at 5-7 per cent. After the Trump administration’s decision, these items now attract duties of 26 per cent and 31–33 per cent, respectively.

 

The US is India’s top market for diamond exports, accounting for a 32.35 per cent share, followed by the United Arab Emirates at 26.22 per cent and Hong Kong at 16.41 per cent in 2024-25 (FY25).

 

Despite the temporary embargo, the American tariffs have delivered a double blow to an already shrinking market. India’s global diamond export market has contracted 20.16 per cent year-on-year, with US exports alone falling 15 per cent — from $9.82 billion in 2023-24 to $8.34 billion in FY25, GJEPC data shows.

 

“There is still uncertainty about the tariffs, even with a 90-day import window. The 26 per cent tariff severely skews margins on these products since importers also need to handle the pricing pressure,” said Jayantibhai N Savaliya, regional chairman — Gujarat region, GJEPC.

 

Surat employs more than 800,000 skilled workers in its diamond industry. Unit managers estimate that a prolonged market downturn, coupled with looming tariffs, could threaten the livelihoods of over 400,000 artisans.

 

Blow-by-blow account

 

Diamond units have built decade-long trade relationships with their import partners and were aware of the possibility of tariffs. However, unit managers said they had expected single-digit tariffs from the American administration, given the thin margins of their business.

 

“If the future tariff is set at 26 per cent, business will drop by at least 25 per cent. We are already facing challenges — there’s little demand in the US for diamonds,” a manufacturer said.

 

Currently, a 25-member unit can polish and export diamonds worth 2,000 carats a month on average.

 

Until April 5, importers were still placing orders, and exporters continued to ship consignments, trying to stock up as much as possible.

 

After the tariff announcement on April 9, multiple manufacturers virtually halted production due to the lack of clarity on future orders.

 

Importers asked their Indian partners to pause deliveries scheduled for dispatch after April 10.

 

“The cancellation rate has also been very high. If the consignment hasn’t been manufactured, all the orders have been cancelled. Under a 26 per cent tariff, hardly any parcel will reach the US,” Savaliya said.

 

Wani of GJEPC said their American partners would need to assess whether retail customers would continue buying precious stones and diamonds at a premium over the next six months.

 

He added that importers were well-stocked for the next three months.

 

“There’s a good chance the consumer base will shrink once the major tariffs kick in. There’s no scope for importers and exporters to split the tariff burden either — margins are already thin at around 3-5 per cent, and business has declined over time,” he said.

 

Markets where diamonds could shine

 

The US was the sole export destination for many diamond polishers, and tapping new international markets won’t be easy.

 

“We only trade between India and the US. We’re exploring the domestic market now. We have little choice but to build new markets from scratch, especially with fixed monthly operating costs and overheads,” said another diamond merchant who deals in diamond-studded jewellery.

 

Savaliya said manufacturers and merchants may look to markets in Dubai, Hong Kong, and China.

 

“We have an event planned in Saudi Arabia and are receiving new orders. Other possible markets include Kuwait and Qatar. We might also get some orders from China and Hong Kong due to geopolitical dynamics. Hong Kong and Dubai impose zero tariffs,” Wani added.

 

Some manufacturers said they were exploring ways to navigate the tariff standoff by routing consignments through trading hubs like Dubai, Hong Kong, or Singapore.

 

“Dubai is the most feasible route since it’s a major global trading hub. But if certificate of origin requirements or other regulations apply, that route might also get choked for us,” said a local manufacturer.

 

In 2023, global diamond exports stood at $75.6 billion, with India commanding the highest share at 22.9 per cent.

 

Others pointed out that while India’s diamond trade may take a hit, the US also stands to lose, as it relies heavily on India for diamond imports.

 

“Exporters will face an impact. We may hit short-term bumps, but the US will lose too — they don’t have the manufacturing, cost-efficiency, or skilled labour. India is the only partner that can cut diamonds affordably for global buyers,” said Kirtikumar Shah, a diamond trader.

 

Polishing the world’s sparkle, now under threat

 

> US: India’s biggest diamond customer, accounting for 32% of exports

> Exports to the US: Dropped 15%, from $9.82 billion in FY24 to $8.34 billion in FY25

> Global demand dip: Led to a 20% shrinkage in India’s total diamond exports in FY25

> Surat: The world’s polishing powerhouse, responsible for over 90% of global diamond finishing

> Half of Surat’s over 800K diamond polishers: Face the risk of losing their livelihood