US Tariffs to Reduce Indian Diamond Exports by 17-20%

Due to high US tariffs that have disrupted the sector's major market and severely stretched operating margins, Indian cut and polished diamond (CPD) exports are expected to drop by 17–20% in FY26, to approximately $11 billion. This anticipated decline exacerbates the already dire picture for the Indian diamond sector, which is being hampered by competition from lab-grown diamonds and waning demand worldwide.

US Tariffs: A Major Blow

As of August 27, 2025, the United States, which supplies more than 40% of the world's demand for polished diamonds, imposed a new 50% duty on Indian diamond imports. Prior tariffs and a 25% penalty associated with India's purchase of Russian oil are combined in this unheard-of pricing increase. Due to the high tariffs, exporters have seen a sharp increase in consumer costs, which has caused them to cancel orders and move demand to other countries, such as Thailand and the Middle East. Rating agencies and industry leaders caution that the tariffs will probably make matters worse, making Indian diamonds less competitive in the US and reducing profit margins to single digits.

Industry Reliance and Ripple Effects

Over 90% of the world's cut and polished diamonds are processed in India, which also generates 80% of the industry's income from exports. Given that half of India's CPD exports were previously destined for the US, the new actions endanger thousands of diamond processing jobs as well as small and medium-sized enterprises based in Gujarat and Surat. In response, the industry has reduced working hours, rerouted shipments, and curtailed output in an attempt to control inventory and make up for lost revenue.

Competitive Pressures and Future Prospects

Demand and margins have already been weakened by competition from lab-grown diamonds, which sell for less than 25% of the price of real stones. This is particularly true in China and the US, two countries that were historically major buyers of Indian diamonds. There is limited chance to recover through other export destinations due to the US tariff hike and the accelerating trend toward less expensive alternatives. Overall CPD exports for the first five months of FY26 are 13% down year-over-year, despite slight increases in exports to the UAE and Hong Kong and higher shipments right before the tariff deadline.