‘We will be able to anticipate the full picture of the impact after August, which is also the time when demand for a year begins to peak ahead of the December holidays and Valentine’s Day.’
IMAGE: Estimates of job losses range from 50,000 to 300,000.
Craftsmen work on diamonds at a diamond processing unit in Surat, August 15, 2025. Photograph: Amit Dave/Reuters
On Raksha Bandhan day in 1938, the Tapi river played havoc in Surat, tossing around boats and sending 84 people into the watery grave.
Since then, the Surtis (residents of Surat) observe the festival one day after its calendar date, in remembrance of the tragedy.
This year, it is an onslaught of another kind in the famed diamond city, an onslaught of heavy tariffs, clouding most festivities.
The United States’ reciprocal tariffs, coupled with penalties, threaten the livelihood of artisans.
Surat is the world’s hub for diamond finishing, and over 90 in 100 diamonds globally are polished.
The job is done by nearly 800,000 artisans, employed in about 5,000 diamond-cutting and polishing units.
In April, the Trump administration imposed sweeping reciprocal tariffs on India, levying a 26 per cent duty, which took effect this month, on the export of gems and jewellery.
Adding to the blow, the US piled on another slab of tariff, driving the effective rate on gems and jewellery to 55 per cent starting August 27.
On the other hand, diamond-polishing and cutting companies typically earn a single-digit profit margin, 4 to 8 per cent, say industry observers.
Not surprisingly then, within days, demand for diamonds plunged by up to 40 per cent, with merchant partners struggling to secure orders from a shrinking US customer base.
Crisis in motion
IMAGE: US President Donald Trump delivers remarks on tariffs at the White House, April 2, 2025. Photograph: Carlos Barria/Reuters
It is a gloomy, monsoon afternoon on a Monday. The diamond unit floor, usually humming with Bollywood tunes and the whirr of polishing wheels, has fallen into an uneasy hush, where most artisans are slipping into quick naps.
Kirtibhai Vaghadiya, 30, is packing a small consignment of polished diamonds with shapes such as hearts and emeralds.
Vaghadiya, who leads a floor of 30 artisans, is not heading out to deliver the order but to hunt for new clients.
He faces a stark choice: Finding enough buyers to bridge the demand gap or submitting to the crisis; cut jobs and send his artisans back to their hometowns.
“Production has come down to 70 carat a day from 100 carat a day six months ago. I will need three more partners instead of the current one client to fill the demand gap,” he said.
Vaghadiya said if the grim situation continued, his business would be set back by at least six months, burning cash in the process.
Estimates of job losses range from 50,000 to 300,000.
“We will be able to anticipate the full picture of the impact after August, which is also the time when demand for a year begins to peak ahead of December holidays and Valentine’s Day,” remarked Rajat Wani, regional director (Surat), Gem and Jewellery Export Promotion Council (GJEPC).
Partners in the US, Wani added, would have to check if their retail customers would be able to absorb higher prices of diamonds.
IMAGE: A trader shows a diamond bracelet at a diamond processing unit in Surat. Photograph: Amit Dave/Reuters
Shrinking base
In 2024-2025, exports of gems and diamonds from India to the global markets amounted to $28.67 billion, an 11.21 per cent decrease from $32.29 billion in FY24.
The US market shrank around 6 per cent to $9.24 billion in FY25 from $9.82 billion in FY24.
Other markets such as the United Arab Emirates and Hongkong too declined 3 per cent and 32.24 per cent, respectively.
“Buyers in the US will now sharply negotiate to bring down the base price of diamonds so that it remains affordable after factoring in the cost of tariffs. This will squeeze our margins, investment in design, the expansion of units, among other things,” said Kirtilal Shah, a diamond merchant.
Shah calls the latest US tariffs the worst impact on the industry after the 2008 global financial crisis and the pandemic.
IMAGE: Surat Diamond Bourse, a diamond trade centre located in the Diamond Research and Mercantile City, also known as DREAM City, in Surat. Photograph: Amit Dave/Reuters
However, stakeholders are pinning their hopes on the rise of lab-grown diamonds to keep the industry’s wheels turning, as natural ones become even more expensive.
“There was a slump in business during the pandemic. In 2008 too, there was a sharp recession. Then, lab-grown diamonds were not popular. Today, they can give some support to existing businesses with demand in India growing gradually,” said Jayantibhai N Savaliya, regional chairman (Gujarat region), GJEPC.
Natural diamonds cost many times more than their lab-grown counterparts, making a tariff on a high-value natural stone far steeper in absolute terms than the same rate applied to a lower-value one.
Merchants may continue to explore newer international markets such as the Gulf region, Europe, and Australia.
Unit operators added that routing diamonds through low-tariff regions like Dubai might also not be feasible due to added costs and the fear of an additional ad valorem on the item.
That said, the industry still says India will continue to be the preferred hub for diamond polishing because of its skill base and manpower.
Photographs curated by Manisha Kotian/Rediff
Feature Presentation: Aslam Hunani/Rediff
