The Impact of the U.S.-India Trade Agreement on the Jewelry Sector

The recent trade accord between the United States and India is set to profoundly influence the worldwide diamond and gemstone market, providing a much-needed sense of stability for American jewelry businesses. This pact, which is especially advantageous for natural diamonds and colored gemstones processed in India, seeks to ease the challenges posed by unpredictable tariffs that have previously led to escalating expenses and supply chain disruptions. Although a provisional agreement awaits finalization, the sector anticipates the elimination of duties on these particular imports, an initiative expected to streamline sourcing and enhance market consistency.

Tariff Adjustments and Market Dynamics

The U.S.-India trade agreement is heralded as a pivotal development for the global diamond and gemstone industry, particularly offering a significant easing of trade tensions for American jewelers. For a considerable period, import duties have been in flux, leading to higher operational costs, extended delivery timelines, and forcing suppliers to reroute their production through other nations to maintain economic viability. This new agreement signals a potential end to these complications, especially for natural diamonds and gemstones processed in India. The core of this relief is tied to an interim accord that, once finalized, is expected to eliminate tariffs on these specific goods, a move eagerly awaited by industry stakeholders. Until this interim agreement is fully implemented, a 25% tariff remains in effect, a substantial reduction from the peak of 50% experienced last August.

The fluctuating tariff landscape has severely impacted India's gem and jewelry export sector, with the U.S. being its largest market, accounting for approximately one-third of total exports. The imposition of rising duties in 2025 led to a sharp decline in trade, with exports to the U.S. plummeting by over 44% between April and December, and polished diamond exports alone falling by more than 60%. This downturn has put immense pressure on manufacturers. Kalpesh Jhaveri, CEO of K.R. Gems and Diamonds International, highlights the mixed feelings within the industry, expressing hope but also uncertainty regarding the agreement's full scope, particularly concerning lab-grown diamonds and the exact tariff rates. He notes that while tariff relief could reduce costs, it might also intensify competition from online sellers who are directly supplied by large overseas manufacturers, posing a challenge to traditional retailers and U.S.-based e-tailers.

Industry Optimism and Future Outlook

Despite some reservations, the new trade agreement is largely viewed as a positive step, offering more advantages than disadvantages. Sanjay Hirawat, Vice President of Shefi Diamonds, emphasizes that the deal provides crucial relief during a challenging period for the diamond market. He suggests that this agreement will benefit loose diamond suppliers and manufacturers in India, and while it might pose some challenges for vendors holding inventory in the U.S., it promises faster delivery times and reduced complexities for American wholesalers, particularly in light of volatile precious metal prices. The hope is that ongoing trade discussions will restore market conditions to their previous stability.

For those in the finished jewelry manufacturing sector, the past few months have been particularly demanding, with rising duties exacerbating the impact of record gold prices. Sweta Jain, founder and owner of Goshwara, views the new tariff deal as a much-needed respite, enabling businesses to manage costs more effectively and potentially pass on savings to partners. Even with the agreement, finished jewelry imports remain more intricate than loose stones, with Indian-made jewelry expected to incur a duty of approximately 24% (18% plus the existing 6% Most Favored Nation duty) upon the interim agreement's signing. A notable exception is jewelry cast in the U.S., which retains its U.S.-origin status even if stones are set and finished in India. This agreement signals long-term growth potential, particularly for gems and jewelry, fostering renewed confidence among suppliers and making India a more attractive sourcing destination by reducing the incentive for tariff-driven detours through other countries.