The United States, a major consumer of diamonds, has slapped a 27% tariff on Indian imports, including polished diamonds. This move has thrown the entire diamond supply chain – ranging from mining companies to jewelers – into turmoil. It’s as if a conductor has lost his baton mid-performance: chaos reigns.

But it doesn’t stop there. Even diamonds cut in India and sent to the US for grading and certification are now affected by these tariffs. The Gemological Institute of America (GIA), the industry’s most trusted lab, has had to pause its analysis of these stones, waiting for the dust to settle.

Indian exporters, already rattled by high customs duties, currently face even greater challenges. With diamond prices already at historic lows, they risk plummeting even further.

Free-Falling Prices

Let’s break it down. The diamond market entered a sharp decline in February 2022 when Russia invaded Ukraine. Sanctions and the embargo on Russian diamonds disrupted India’s diamond-cutting industry. At the same time, the global economic landscape turned inflationary, particularly in the US, where consumers scaled back spending on “luxury” items. Meanwhile, China’s diamond market saw a drastic fall in early 2023: demand dropped by approximately 25% compared to 2022, sending prices to their lowest levels in 14 years. In an unprecedented move, De Beers allowed several of its diamond lots (sights) to remain unsold.

By 2024, natural diamond prices continued to decline, weighed down by excess supply. The US, which accounts for half of the world’s diamond purchases, could exacerbate the downturn. If American demand further weakens, mining companies from Botswana or Namibia may reduce production to prevent market saturation and a price collapse. No other country will be able to compensate for a potential decline in the US diamond market, and many major buyers are already jittery, with investments in both the diamond trade and the broader financial markets.

Jobs at Risk and Mines on Hold

India, long the undisputed leader in diamond polishing, faces the grim prospect of mass job losses. Diamonds are the country’s third-largest export to the US. Industry leaders like the president of the Indian Diamond Institute in Surat – India’s diamond capital – predict substantial job cuts in the short term. To counter these tariffs, Indian officials are focusing on negotiating a bilateral trade agreement, which they hope to conclude within the next few months. Meanwhile, mining companies, including those in Botswana, have canceled upcoming auctions, waiting for more favorable market conditions.

The US decision to impose tariffs on polished diamonds from India has cast a dark cloud over the global diamond industry. With economic uncertainty, job losses and plummeting prices hanging over the market, the brilliance of these precious stones seems to be dimming. However, there is a glimmer of hope: upcoming trade negotiations could restore clarity and shine to a market in crisis.