US Tariff Hike to Slash Indian Diamond Polishing Revenue
Mumbai, August 28, 2025: The imposition of 50% tariffs by the U.S. on gem and jewellery imports is expected to reduce India’s diamond polishing industry revenue by 28-30% to $12.5 billion in FY26, the lowest since 2007, according to CRISIL Ratings.
Impact of US Tariffs on Exports
The 50% tariffs—comprising 25% reciprocal and 25% penalty—come after a series of declines in the natural diamond market, including a 40% drop over the past three fiscals due to falling prices, reduced demand in the U.S. and China, and competition from lab-grown diamonds. India polishes nearly 95% of the world’s diamonds, with 80% of its revenues derived from exports. The U.S. remains the largest market, accounting for 35% of these exports.
Challenges for Diamond Polishers
The combination of low profit margins and declining demand makes it nearly impossible for Indian diamond polishers to absorb the extra tariff. Passing the cost to U.S. consumers is also unlikely, which could shrink operating margins by 50-100 basis points. CRISIL’s analysis of 43 polishers, representing nearly a quarter of industry revenues, confirms the projected downturn.
Market Adjustments and Production
Sales were already affected after a 10% tariff was introduced in April 2025, reducing the U.S. share of India’s polished diamonds to 24% in the first four months of this fiscal. In anticipation of festival demand, polishers increased production in July and August, resulting in an 18% rise in exports in July compared to last year. Nonetheless, competition from lab-grown diamonds, which already hold 60% of the U.S. market by volume, and weak Chinese demand continue to pressure revenues.
Financial Implications
CRISIL predicts that operating margins could fall to 3.5-4.0%, down from a peak of 5.5% in FY23. Limited reliance on external debt has helped polishers maintain stable capital structures, but shrinking operations and profitability pressures will test credit profiles. Financial leverage is expected to remain at 0.7-0.8 times, while interest coverage may fall to 2 times from 2.3-2.5 times last fiscal.
Strategies to Navigate the Tariff Landscape
To mitigate revenue losses, diamond polishers may pursue three strategies: boosting domestic sales, expanding into alternative international markets, and establishing polishing units in global trading hubs like the UAE and Belgium. Even with these measures, a portion of diamonds will still be polished in India, making them subject to the new U.S. tariffs. Timely collection from overseas customers and lean inventory management will be critical to sustaining operations.
Outlook for the Industry
While domestic demand is increasing, it is insufficient to offset the losses in key export markets. The UAE has emerged as a growing export hub, accounting for nearly 20% of India’s polished diamond exports. Going forward, close monitoring of natural diamond demand, geopolitical developments, and U.S. trade policies will be essential for industry stability. For official updates on trade and industry regulations, refer to Ministry of Commerce & Industry.
