Gems and Jewellery Exports: Short-Term Slowdown Likely Despite US Tariff Pause

India's gems and jewellery (G&J) export sector, a crucial pillar of the country's economy, faces turbulent times as it navigates global uncertainties, tariff fluctuations, and evolving market dynamics. Despite a recent 90-day tariff pause by the United States on certain Indian gem and jewellery imports, industry experts anticipate a short-term slowdown in exports, particularly to the US, amid cautious buyer sentiments and residual tariff concerns.

US Tariff Pause Offers Temporary Relief but Triggers Shipment Surge

The US administration recently announced a temporary 90-day suspension of the 26% tariff imposed on Indian gems and jewellery imports, which offered a momentary reprieve to exporters grappling with rising international trade barriers. However, this tariff pause follows the imposition of a universal 10% baseline tariff that came into effect on April 4, 2025, complicating the pricing landscape for exporters.

Industry insiders revealed that in the days leading up to the April 4 tariff imposition, Indian exporters accelerated shipments to the US, sending nearly $343.7 million worth of gems and jewellery between April 1 and 4 — almost six times the volume shipped in the same period last year. Cut and polished diamond exports alone surged by 481% to $319.9 million during this brief window[1].

According to Kirit Bhansali, Chairman of the Gold and Jewellery Export Promotion Council (GJEPC), this pre-tariff rush is expected to cause a lull in new US orders over the following month and a half, as buyers and sellers recalibrate amidst tariff uncertainties. Moreover, the 10% baseline duty particularly threatens low-margin segments like loose diamonds, which typically operate on slim 3-5% profit margins[1].

Industry Faces Multiple Headwinds: Global Demand, Geopolitical Tensions, and Competition

The Indian gems and jewellery export industry recorded an 11.72% decline in exports in the fiscal year 2024-25, falling from $32.28 billion in FY24 to $28.5 billion. This drop reflects a confluence of adverse factors including weak demand in major markets such as the US and China, ongoing geopolitical conflicts, sanctions against Russian-mined diamonds, and stiff competition from cheaper lab-grown diamonds[2][4].

Some key highlights from the fiscal year 2024-25 include:

• Cut and polished diamond exports dropped 16.75% to $13.2 billion.
• Silver jewellery exports fell sharply by 40.58% to $962 million.
• Lab-grown polished diamonds declined by nearly 10% to $1.2 billion.
• Gold jewellery exports remained relatively stable with a marginal 0.11% decline, totaling $11.21 billion.
• Studded gold jewellery bucked the downward trend, growing 14% to $6.1 billion, while platinum jewellery exports increased by 11.79% to $182.75 million[4].

Imports of raw materials also witnessed a slump. Rough diamond imports, vital for India’s diamond cutting and polishing industry, declined by over 24% to $10.8 billion with volumes down 16.2%, signaling weakening demand and inventory adjustments[4]. This slowdown is also reflected in January 2025 export figures, where gems and jewellery shipments dropped 7% year-on-year to $2.24 billion, with cut and polished diamond exports down 12.5% to $1.02 billion[3].

Impact of US-China Trade Dynamics and Shift in Manufacturing Bases

The ongoing tariff wars between the US and China have created a complex trade environment. The US 125% tariff on Chinese imports has prompted several Chinese companies to explore relocating manufacturing bases to India, presenting a potential opportunity for the Indian gems and jewellery sector[1].

Alok Sonkiya, President of the Jewellers Association Jaipur, highlighted that Indian exporters have started receiving inquiries from Chinese players considering shifts to India to evade steep tariffs. Sabyasachi Ray, Executive Director of GJEPC, added that this shift could increase India’s role as a diamond jewellery manufacturing hub. However, he cautioned that consumers may face a 5-10% price increase on gems and jewellery due to tariff costs, with buyers and exporters negotiating ways to share tariff burdens[1].

Sector-Wise Performance in Early 2025: Mixed Signals

The early months of 2025 witnessed varied performance across different segments:

• Gold jewellery exports grew by over 20% in January 2025, reaching $949 million, driven by global economic uncertainty that boosted gold’s safe-haven appeal[3].
• Conversely, lab-grown diamond exports declined 25% in January 2025, affected by price fluctuations and subdued demand.
• Coloured gemstone exports dropped nearly 10%, though the segment is expected to remain stable in the longer term[3].
• February 2025 saw a sharp 23% fall in gem and jewellery exports to $2.42 billion, with cut and polished diamond exports falling by 20% and gold jewellery exports declining 18%, attributed to rising gold prices and economic uncertainty[5].

Industry leaders emphasize that while the sector currently faces significant headwinds, there are signs of potential recovery. The stabilization of diamond prices after two years of volatility and a gradual improvement in global market sentiment provide cautious optimism[4][5].

Government Initiatives and Prospects of a Free Trade Agreement

Recognizing the challenges, the Indian government is actively engaging with the US to explore a Free Trade Agreement (FTA), which could provide a more sustainable solution to tariff issues. If finalized within the next month, this FTA could substantially boost exports by reducing or eliminating duties that currently weigh on the sector[1].

Conclusion: Navigating a Volatile Phase with Strategic Adjustments

The Indian gems and jewellery export industry is currently navigating a volatile period marked by global economic uncertainty, fluctuating tariffs, and shifting trade dynamics. Although the 90-day US tariff pause provides temporary relief, the industry anticipates a near-term slowdown in fresh orders and shipments due to the pre-tariff shipment surge and ongoing tariff barriers.

Key factors shaping the near future include:

• Potential relocation of manufacturing from China to India, fueled by Sino-US trade tensions.
• Government efforts to negotiate trade agreements to ease tariff burdens.
• Stabilization of diamond prices contributing to market confidence.
• Need for exporters to balance tariff costs with competitive pricing.

Despite these challenges, segments like studded gold and platinum jewellery are showing resilience. With strategic government support and adaptive industry measures, India’s gems and jewellery sector aims to rebound and capitalize on fresh opportunities in the global market.

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