U.S. tariff shifts cloud India’s expected diamond duty relief, industry warns

Conflicting U.S. tariff moves have thrown India’s hoped-for duty exemption for cut-and-polished natural diamonds and coloured gemstones into uncertainty, prompting exporters and trade bodies to rush shipments and ask Mumbai customs to work weekends. The joint U.S.-India trade language that would remove duties on Annex III items, which lists loose natural diamonds and gemstones cut in India, is tied to the “successful conclusion” of an interim trade agreement and, per JCK reporting, may not take effect for another month.

That conditional phase-out sits uneasily alongside a string of presidential announcements and legal rulings. Rapaport reported presidential statements escalating tariffs in stages, with a sequence moving from 10 percent to 25 percent and a later announcement of a 50 percent rate scheduled for August 27, while Economic Times noted the U.S. Supreme Court invalidated the earlier “reciprocal tariffs” and the administration then imposed replacement levies under Section 122 of the Trade Act of 1974 at 10 percent, later raised to 15 percent, a measure that remains in effect for a maximum of 150 days unless Congress acts.

The tariff math is complicated for finished goods. JCK and GJEPC figures show current U.S. tariffs on Indian imports as of February 7 at jewelry 31 percent, a blend of a 25 percent reciprocal tariff plus a 6 percent MFN duty, while cut-and-polished natural diamonds were listed at 25 percent and lab-grown diamonds at 25 percent. Under the interim framework the headline U.S. rate for jewelry would nominally fall to 18 percent, but GJEPC warns the effective levy on finished jewelry would be 24 percent once the 6 percent MFN duty remains in place. Loose lab-grown diamonds are excluded from Annex III and, JCK reports quoting GJEPC, would face an 18 percent tariff without the 6 percent MFN add-on.

The economic stakes are concrete and recent. Economic Times reported India’s cut-and-polished diamond exports to the U.S. plunged from $3.64 billion in April-December 2024 to $1.45 billion in April-December 2025, a fall of more than 60 percent, and Al Jazeera noted India’s broader cut-and-polished exports fell to $13.2 billion in 2024-25 from $16 billion the prior year. Market pressure shows in pricing: Rapaport recorded the 1-carat RAPI down 1.3 percent on recent market moves.

Industry leaders describe margins as fragile and operational responses as urgent. Kirit Bhansali, chairman of the Gem & Jewellery Export Promotion Council, said they are consulting legal experts and trade officials and remain “hopeful exports of diamonds and coloured gemstones will be under zero duty.” He also warned, “[Had tariffs been in the 10% to 15% range, it might have been possible to mitigate the effects by having each member of the supply chain take a small hit on margins. But that plan is over. [A rate of] 25% was also difficult, but this is beyond [our] control.]” An anonymous New York dealer told Rapaport, “The fragility of margins in the loose-diamond trade makes even the 25% rates unworkable.” On the ground in Surat an employer of about 40 workers said, “We still have some orders for Diwali and will try to complete them.”

For merchants, cutters and U.S. retailers the immediate question is administrative: will the interim trade agreement be signed and when will USTR and Customs issue binding guidance, or will Section 122 tariffs and any further presidential action govern imports for the coming 150 days. Until those markers arrive, exporters are accelerating shipments, Mumbai customs have been asked to open Sundays, and a trade that already lost billions in export revenue faces a calendar in which a policy pronouncement can materially change the price calculus overnight.