US tariff impact: Cut and polished diamond exports to fall 17-20% in FY26

Cut and polished diamond (CPD) exports are projected to decline by 17-20 per cent in 2025-26 (FY26) due to the impact of high tariffs, which are set to significantly raise costs for these diamonds in the United States (US), according to a report by CareEdge Ratings.

 

"High tariffs, if fully passed on, will substantially increase end-consumer prices in the US, which is expected to adversely affect CPD demand. Hence, we continue to maintain a negative outlook and anticipate a further 17-20 per cent fall in CPD exports to around $11 billion in FY26," the ratings agency noted.

US remains the largest market

The US imposed a 50 per cent tariff on Indian imports starting August 27, which also included a 25 per cent penalty for purchasing Russian crude. India’s diamond industry is expected to bear the brunt, as the US remains one of its largest markets.

   

India processes over 90 per cent of the world’s polished diamonds by volume and exports nearly 47 per cent of the country’s total gems and jewellery exports. The industry earns 80 per cent of its revenue from exports, with the US alone making up over 40 per cent of global polished diamond demand. In FY25, India’s direct exports to the US stood at 37 per cent.

 

According to the report, the CPD industry operates on single-digit profit margins, and the imposition of across-the-board tariffs as high as 50 per cent has further intensified pressures across the value chain, heightening concerns over revenue, profitability, liquidity, and operational resilience.

 

Akhil Goyal, Director, CareEdge Ratings, said, "Tariffs rising to 50 per cent in a key diamond-consuming nation are expected to worsen the ongoing demand sluggishness in the CPD industry. The sector continues to face competition from lab-grown diamonds (LGDs), and there is limited scope for offsetting demand through alternative markets such as India and China."

Momentum to stay subdued

India has become the world’s second-largest diamond jewellery market, holding around 10 per cent of the global share. Demand grew strongly in 2024 and is expected to continue in 2025, driven by rising incomes, wider acceptance of diamonds in tier-II and -III cities, and more financially independent women. However, this growth is from a small base, and momentum may remain weak in the near term because of record-high gold prices. 

Lab-grown diamonds add pressure

The CPD industry has faced challenges over the past two years. Exports dropped 17.5 per cent year-on-year to $13.3 billion in FY25 due to global headwinds. LGDs, which are cheaper, are gaining popularity in India. While domestic demand is steady, it cannot make up for the steep fall in exports to the US and China.

Industry’s response

According to CareEdge Ratings, managing inventory is now a top priority across the value chain. Miners have reduced production and allowed deferrals to avoid oversupply. Indian diamantaires are cutting costs, keeping debt under control, and focusing on owned sources to maintain liquidity and profitability. Retailers, on the other hand, are closely watching consumer demand amid rising diamond prices and US tariffs.

 

Many Indian CPD players are scaling back production, expanding into new geographies with more focus on European and domestic markets, and seeking government incentives. If the current trade challenges persist, companies may also consider shifting some processing to countries with lower tariffs.