US Tariffs Threaten India's Gems And Jewellery Exports

India's $32 billion gems and jewellery industry is facing a significant downturn following the United States' imposition of a 26% reciprocal tariff on Indian imports. This development poses a substantial challenge to the sector, which relies heavily on the U.S. market, accounting for approximately 30% of its annual exports.

The tariff, announced by President Donald Trump on April 2, 2025, is part of a broader strategy to address trade imbalances. Trump stated that the 26% levy on Indian goods is a response to India's average tariff of 52% on American products. He emphasized the need for equitable trade practices, asserting that the U.S. has been subjected to unfair treatment in global trade.

Industry leaders have expressed concern over the severity of the tariff. Colin Shah, Managing Director of Kama Jewelry, remarked that the imposed duty is more severe than anticipated and is expected to adversely affect exports. The U.S. market is a critical destination for Indian gems and jewellery, with exports totaling approximately $9.9 billion in the fiscal year 2024.

The tariff's impact is expected to be particularly pronounced in the diamond and studded-gold jewellery segments. Cut and polished diamonds constitute 57% of India's total gems and jewellery exports to the U.S., while studded-gold jewellery accounts for 27%. The increased costs may deter U.S. importers, leading to a potential decline in orders. Kirit Bhansali, Chairman of the Gem and Jewellery Export Promotion Council, indicated that the trade might come to a standstill as U.S. importers reassess their sourcing strategies.

Major Indian exporters, including Goldiam International and Vaibhav Global, are anticipated to face significant challenges due to the tariff. Shares of these companies experienced declines following the announcement, with Goldiam International dropping by as much as 10% and Vaibhav Global by over 4%. Analysts suggest that the increased duty will erode profit margins and reduce the competitiveness of Indian products in the U.S. market.

The U.S. tariffs extend beyond the gems and jewellery sector, affecting other industries such as electronics, textiles, and engineering goods. Electronics exports, valued at nearly $14 billion, are among the top sectors impacted. Prior to this tariff, U.S. duties on Indian electronic goods averaged just 0.41%, highlighting the substantial increase imposed.

In response to the tariffs, Indian authorities have taken steps to mitigate trade tensions. The government recently repealed a 6%“Google tax” on online advertisements, a move aimed at addressing U.S. concerns and fostering a more favorable environment for trade negotiations. This tax, introduced in 2016, targeted global tech companies operating without a physical presence in India.

Despite these efforts, the imposition of tariffs underscores ongoing trade frictions between the two nations. The U.S. maintains a $46 billion trade deficit with India and has criticized India's high tariffs on American goods, including 70% on passenger vehicles and 50% on apples. The current U.S. administration views these measures as necessary to address longstanding trade imbalances and to encourage fairer practices.

The broader context of these tariffs reveals a global shift in trade policies, with the U.S. implementing varying tariff rates on different countries. China faces tariffs exceeding 50%, while the European Union is subjected to 20% duties. These actions have elicited strong reactions worldwide, with concerns about potential retaliatory measures and the escalation of trade disputes.

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