Trump's reciprocal tariff to hurt India's gems and jewellery sector; exporters to be hit

The US government's decision to impose a 27% additional reciprocal tariff on Indian imports is expected to significantly impact India's gems and jewellery sector, experts said. Gems and jewellery made up 12.8% of India's exports to the US and amounted to $9.9 billion in FY24.

US President Donald Trump announced the new tariff on 2 April, which he said is about half the rate of India's 54% tariff on US imports. The current US duty for Indian gold jewellery imports is 5%, per a note from EY, and there are no duties on import of cut and polished diamonds.

Garments, engineering goods, electronics, pharmaceuticals, and gems and jewellery accounted for 72.7% of the total goods trade between India and the US in FY24, contributing $56.34 billion out of the overall trade of $77.52 billion.

“The [gems and jewellery] trade is expected to come at a standstill as US importers will assess whether to place orders with Indian jewellery exporters,” said Kirit Bhansali, chairman of the Gem and Jewellery Export Promotion Council.

He added that while gold and diamond jewellery are considered a luxury in the US, they are viewed as an investment in India. Therefore, if prices rise, demand in the US is likely to decline.

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Experts said diamond and studded-gold jewellery exporters will be the most impacted by the US tariffs.

For starters, the additional 27% duty will be a challenge for the importer in the US to bear, leading to lower exports from India, said Anup Zaveri, a partner at Real Illusion LLP, a diamond manufacturer. He added that exporters will need to gauge the duty on specific items such as loose diamonds and gold-studded items.

Cut and polished diamonds accounted for 57% of India’s total gems and jewellery exports to the US in FY24, making them the largest contributor, according to a report by Emkay Institutional Equities on 26 March.

Studded-gold jewellery comprised 27% of these exports. The remaining share came from silver jewellery, lab-grown diamonds, and plain gold jewellery, which had a comparatively lower contribution.

Affected exporters

The tariffs are expected to hit major exporters including Goldiam International, Vaibhav Global and Rajesh Exports. However, companies with a lower dependence on US exports such as Kalyan Jewellers and Titan are likely to be less affected.

“Sentimentally, the tariff on gems and jewellery will be negative for jewellery exporters as demand for gold jewellery is likely to get impacted,” said Preeyam Toila, equity research analyst, FMCG and retail, at Axis Securities. “Moreover, from the domestic perspective, surging gold prices due to global uncertainty will have near-term pressure on domestic demand.”

Also Read | Trump Tariffs: Electronics, Gems & Jewellery most exposed, auto sector relatively insulated

Goldiam International shares fell as much as 10% on the BSE on Thursday, while Vaibhav Global declined more than 4%. Rajesh Exports declined 3.2% before recovering.

Trump said on April 2 that sectors such as pharmaceuticals, semiconductors, copper, lumber articles, gold, energy and minerals will be spared reciprocal tariffs. Also, sector-specific tariffs will be imposed later.