Interim India-US Trade Agreement Slashes Diamond Tariffs, Offering Hope to Surat's Gem Industry
In a significant development for bilateral trade, India and the United States have reached an interim agreement that includes a substantial reduction in tariffs on cut and polished diamonds (CPDs). This move has rekindled optimism in Surat's renowned gems and jewellery industry, which suffered a severe downturn last year due to punitive duties.
Tariff Rollback from 50% to 18% Provides Immediate Relief
As per the interim deal, the US government has rolled back the tariff on CPDs to 18% from a steep 50%. This reduction comes after reciprocal tariffs imposed by the US last August surged duties on polished diamonds and coloured gemstones to 50%, making exports financially unviable for many Indian businesses.
The impact of the previous high tariffs was stark: exports of CPDs from India to the US plummeted by over 60% between April and December 2025, dropping from USD 3,636.36 million to USD 1,450 million, according to data from the Gems and Jewellery Export Promotion Council (GJEPC). Overall, gems and jewellery exports to the US, which account for 31% of India's total exports in this sector (valued at USD 9.23 billion in 2024-25), fell by 44.42% during that period.
Industry Leaders Express Optimism for Future Growth
GJEPC chairman Kirit Bhansali welcomed the interim agreement, stating that the council is optimistic about the potential for zero-duty imports of loose diamonds and coloured gemstones into the USA under Annexure 3 of the US reciprocal tariff list. "This provides much-needed support for diamond exports," Bhansali emphasized, highlighting how the earlier tariff hikes from zero to 10% in April and then to 50% by August had strained working capital, liquidity, and margins for exporters.
Rajesh Rokde, Chairman of the All India Gem & Jewellery Domestic Council (GJC), described the tariff reduction as "not just a financial adjustment" but a recognition of the unmatched artistry and craftsmanship of India's gem industry. He noted that lowering trade barriers in one of the world's largest consumer markets will strengthen global competitiveness and instill confidence across the supply chain.
Surat's Diamond Industry Faces Multiple Challenges
The recent tariff relief comes after a series of crises for Surat's diamond sector. Since April 2022, the industry has grappled with US and EU sanctions on Russian state-owned Alrosa, the world's largest diamond mining company, following the Russia-Ukraine war. Dinesh Navadiya, Chairman of the Indian Diamond Institute, pointed out that over 30% of rough diamonds are imported from Russia to the Indian market, and subsequent conflicts like the Israel-Hamas and Iran wars further disrupted the industry.
Navadiya added that the Free Trade Agreement (FTA) with the EU brought some positive news, and now with the US reducing tariffs to 18%, Surat's diamond industry stands to gain further advantages as new opportunities are explored in the EU. "The diamond exporters will now receive more new orders, and exports will increase in the future," he predicted.
Employment and Economic Implications for Surat
Surat, which cuts eight out of every ten diamonds globally, employs over 8 lakh people in cutting, polishing, and trading diamonds. Jagdish Khunt, president of the Surat Diamond Association, expressed relief that the dark days of recession may be over. "New demands will come, and factories will start functioning with full production," he said, noting that the industry has already urged the government to negotiate further relief on tariffs for CPD and diamond-studded gold jewellery with US counterparts.
The joint statement from the interim agreement specifies that the US will remove reciprocal tariffs on a wide range of goods, including gems and diamonds, as part of efforts to align trade policies. This development follows similar relief from the UK, which dropped import duties on cut and polished diamonds and gold jewellery in its trade agreement with India last year.
As Surat's gems and jewellery industry looks to bring the bling back, this interim deal marks a crucial step toward recovery, potentially paving the way for enhanced exports and economic stability in the region.
