Will Trump’s India tariffs shut down world’s greatest lower diamond provider? | Enterprise and Economic system

For Kalpesh Patel, Diwali, the competition of lights celebrated throughout India, would possibly nicely mark lights out for his eight-year-old diamond chopping and sprucing unit.

The 35-year-old employs about 40 staff who rework tough diamonds into completely polished gems for exports on the small manufacturing unit in Surat, a metropolis situated within the western Indian state of Gujarat.

His enterprise has survived a number of pace bumps in recent times. However United States President Donald Trump’s mammoth 50 p.c tariffs on imports from India is likely to be the ultimate nail within the coffin for his unit, a part of an already struggling pure diamond business, he mentioned.

“We nonetheless have some orders for Diwali and can attempt to full them,” he instructed Al Jazeera.

Diwali, arguably India’s single greatest competition, scheduled for late October this yr, often sees home gross sales of most items soar. “However we’d should shut the enterprise even earlier than the competition, as exporters would possibly cancel the orders as a result of excessive tariffs within the US,” Patesh mentioned.

“It’s turning into more and more tough to pay the salaries and keep different bills with falling orders.”

He’s among the many 20,000-odd small and medium merchants in Surat, often called the “Diamond Metropolis of India”, which collectively lower and polish 14 out of each 15 pure diamonds produced globally.

The US is their single largest export market. In response to the Gem and Jewelry Export Promotion Council (GJEPC), India’s apex physique for the business, the nation exported lower and polished gems price $4.8bn to the US within the 2024-25 monetary yr, which led to March. That’s greater than one-third of India’s whole exports of lower and polished diamonds, at $13.2bn over the identical interval.

Dimpal Shah, a Kolkata-based diamond exporter, instructed Al Jazeera that orders have already began getting cancelled. “Consumers within the US are refusing to dump the shipped merchandise, citing excessive tariffs. That is the worst part of my two-decade-old profession in diamonds.”

US imposes penalty

A 25 p.c reciprocal tariff on all Indian items, which Trump introduced on April 2, got here into impact on August 7, after talks between the two international locations did not yield a commerce deal by then. Negotiations are persevering with.

In the meantime, on August 6, Trump introduced an extra 25 p.c tariff, taking the entire tariff price to 50 p.c. He termed the extra tariff that might come into impact from August 27 as a penalty for India’s continued shopping for of Russian oil, because the US president tries to push Moscow into accepting a ceasefire in Ukraine.

For the gems business, which already confronted a pre-existing 2.1 p.c tariff, the efficient tariff now quantities to 52.1 p.c.

Ajay Srivastava, the founding father of World Analysis Commerce Initiative (GTRI), a commerce analysis group, termed the Trump authorities’s extra hike as an act of “hypocrisy”, citing how the US itself continues to commerce with Russia, and the way China – Russia’s greatest oil purchaser – faces no related penalty.

“Trump is concentrating on India out of frustration because it refused to toe the US line on the Russia-Ukraine battle, and for its refusal to open its agriculture and dairy sector,” he added, referring to broader ongoing commerce talks and variations over US calls for for higher entry to vital Indian financial sectors.

But, regardless of the causes for Trump’s tariffs, they’re hurting a diamond business already bleeding from a number of hits.

Diamond sector badly hit

Greater than 2 million persons are employed in diamond sprucing and chopping items in Surat, Ahmedabad and Rajkot cities in Gujarat — and lots of have already suffered wage cuts in recent times, first due to the COVID-19 pandemic, after which Russia’s full-scale invasion of Ukraine.

“The pandemic led to financial slowdown affecting the worldwide markets in Hong Kong and China,” Ramesh Zilriya, the president of Gujarat’s Diamond Staff Union, instructed Al Jazeera. The “Western ban on tough diamond imports from Russia as a result of Russia-Ukraine battle and the G7 ban on Russia additionally affected our enterprise”, he added.

Russia has traditionally been a serious supply of uncooked diamonds.

Zilriya claimed that 80 diamond staff have died by suicide over the previous two years due to this financial disaster.

“The state of affairs within the worldwide market led to the wages of the employees getting halved to roughly 15,000-17,000 rupees ($194) per 30 days, which made survival tough within the face of rising inflation,” he mentioned.

As soon as the Trump tariffs totally kick in, Zilriya fears that as much as 200,000 individuals in Gujarat might lose their livelihoods.

Already, greater than 120,000 former diamond sector staff have utilized for advantages. A 13,500-rupee ($154) allowance per youngster, to assist their households, was promised in Could by the state authorities to those that have misplaced jobs as a result of tumult within the sector in recent times.

However the tariffs, pandemic and battle usually are not alone guilty for the disaster: Lab-grown diamonds are additionally slowly consuming into the market of their pure counterparts.

“In contrast to pure [diamonds], the lab-grown diamonds usually are not mined however manufactured in specialised laboratories and priced at simply 10 p.c of the pure ones. It’s tough even for a seasoned jeweller to establish the pure and lab-grown with a unadorned eye. The style of shoppers is now shifting to lab-grown [diamonds], as they’re low-cost,” mentioned Salim Daginawala, the president of the Surat Jewellers Affiliation.

Decline in exports

Within the 2024-25 monetary yr, India imported tough diamonds price $10.8bn, marking a 24.27 p.c decline from the $14bn imported in 2023-24, as per the statistics by the GJEPC.

The exports of lower and polished pure diamonds equally witnessed a 16.75 p.c decline, with exports declining to $13.2bn in 2024-25 as in contrast with $16bn within the previous yr.

“This transfer [the tariffs] would have far-reaching repercussions on the Indian financial system which may disrupt vital provide chains, stalling exports and threatening hundreds of livelihoods. We hope to get a beneficial discount in tariffs; in any other case, it will be tough to outlive,” mentioned Kirit Bhansali, the chairman of the GJEPC.

The tariffs may additionally damage US jewellers, warned Rajesh Rokde, the chairman of the All India Gems and Jewelry Home Council (GJC), a nationwide commerce federation for the business.

“The US has round 70,000 jewellers who would additionally face a disaster if the jewelry turns into costly,” Rokde added.

A home resolution?

Merchants say that the necessity of the hour is to extend home demand for diamonds and diversify to new markets.

A stronger home market “wouldn’t solely contribute to the native financial system, however would additionally create jobs for a number of hundreds of individuals”, mentioned Radha Krishna Agrawal, the director of Narayan das Saraf Jewellers in Varanasi metropolis, within the northern state of Uttar Pradesh.

The tariffs, he mentioned, may show a “blessing in disguise” in the event that they find yourself decreasing the dependence of India’s gems business “on different international locations”.

Bhansali mentioned that the home gems and jewelry market was rising, and anticipated to achieve $130bn within the subsequent two years, up from $85bn for the time being. The business can be searching for new markets, together with Latin America and the Center East.

Gold already gives an instance of a robust home market, cushioning the affect of hits on exports, mentioned Amit Korat, the president of the Surat Jewelry Producers Affiliation.

However for now, the diamond sector in India has no such defend. It must be saved, urgently, mentioned Patel, the Surat enterprise proprietor on the cusp of shutting down his sprucing and chopping unit.

With out assist, he mentioned, “the enterprise will lose its shine eternally”.