Trump tariffs shake India’s diamond industry
The Surat Diamond Bourse, touted as the world’s largest office complex—eclipsing even the Pentagon in size and representing India’s expanding trade aspirations, remains eerily quiet, with only a handful of traders at work.
Exports in India’s diamond industry have already fallen to a two-decade low due to weak Chinese demand, and now higher tariffs imposed by U.S. President Donald Trump pose a threat to its access to its largest market, which constitutes nearly a third of its $28.5 billion annual exports of gems and jewelry.
In Surat, where over 80% of the world’s rough diamonds are cut and polished, orders have started dwindling as impending U.S. tariffs unsettle buyer confidence.
While smaller exporters have fewer ways to cushion the impact, some larger players plan to relocate part of their operations to countries like Botswana, where there is a lower 15% U.S. tariff. India’s current 25% tariff is set to double on August 27.
"We are in a wait-and-see mode until the end of August, but may increase production in Botswana if this persists," said Hitesh Patel, managing director of Dharmanandan Diamonds, which anticipates U.S. tariffs will cut its annual revenue by 20–25%.
Shaunak Parikh, vice chairman of the Gem and Jewellery Export Promotion Council (GJEPC), stated that the industry is also responding to the slower demand by reducing working days and hours.
At the Surat Diamond Bourse, more than 4,700 offices have been sold, but fewer than 250 are in use, with several companies rethinking their plans to move in, an official from the bourse said on condition of anonymity.
The owner of a Mumbai-based diamond firm, who purchased space at the bourse last year, said he had put relocation plans on hold.
"U.S. tariffs have already affected our business, and we don’t want the extra hassle of moving from Mumbai to Surat," he said, requesting anonymity to avoid identifying his company.
In December 2023, during the inauguration of the Surat Diamond Bourse—built over 6.7 million square feet, surpassing the Pentagon’s 6.5 million—Prime Minister Narendra Modi hailed it as a symbol of "new India’s strength and new resolve."
Comprised of nine interconnected towers, each with 15 floors and sleek glass facades, the sprawling bourse includes banks, customs offices, secure vaults, and a jewelry mall, designed as a one-stop hub for the global diamond industry.
Little sparkle despite peak season
During this time of year, workers in Surat normally increase production to meet a surge in U.S. orders ahead of Christmas and the New Year. This year, however, many artisans are unsure if they will even have work.
"Demand has dropped so sharply that the diamond packets I sold for 25,000 rupees ($285.84) last year now barely fetch 18,000," said Shailesh Mangukiya, who operates a cutting and polishing unit in Surat, the second-largest city in Modi’s home state of Gujarat in western India.
Mangukiya said he had reduced his staff from 250 to 125.
GJEPC’s Parikh mentioned that in the absence of a trade deal between India and the U.S. to reduce tariffs, 150,000 to 200,000 workers could lose their jobs.
Industry officials said that due to the tariffs, U.S. buyers are likely to source diamonds from countries such as Israel, Belgium, and Botswana.
India’s diamond exporters are attempting to increase sales to Asia, Europe, and the Middle East to compensate for U.S. losses, but finding new diamond buyers is not easy, exporters said.
The industry is cutting back on rough diamond purchases and operating with minimal inventories to maintain cash flow, while financially struggling smaller units have started offering significant discounts to remain afloat, exporters said.
The sole silver lining is India’s domestic demand.
Demand for diamonds in India, which recently surpassed China as the world’s second-largest market, continues to show growth, according to Hitesh Shah, a partner at Venus Jewel, which supplies global luxury brands such as Tiffany & Co. and Harry Winston.
"Our sales over the last 10-15 days have slowed down slightly but not significantly because the loss of American demand is being offset by strong demand in the Indian market," Shah said.
($1 = 87.46 rupees)
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