Navigating New Trade Winds: India's Gem and Jewellery Sector Adapts to Evolving US Tariffs

Understanding the Shift in US Trade Policy and Its Immediate Effects

The United States has recently replaced its temporary Section 122 balance-of-payments surcharge with a new Section 301 tariff framework, effective July 24, 2026. This transition maintains an additional 10% duty on imports of Indian gems and jewelry, a decision that follows a comprehensive review by the Office of the United States Trade Representative (USTR) concerning forced labor practices across various economies.

India's Strategic Positioning Amidst Global Tariff Changes

Despite the continuation of the 10% tariff, India has secured a more favorable position by being placed in a lower tariff category. This is largely attributed to India's proactive measures, including a recent amendment to its Foreign Trade Policy that prohibits the import of goods made with forced labor. This commitment to ethical practices provides Indian exporters with a 2.5 percentage-point tariff advantage over several key competitors such as China, Hong Kong, Thailand, Turkey, the UAE, Israel, and Vietnam, all of whom now face a 12.5% additional tariff.

Industry Leaders' Perspective on the Tariff Challenge

Mr. Kirit Bhansali, Chairman of the GJEPC, firmly refutes any assertions linking India's gem and jewelry sector to forced labor, emphasizing the industry's unwavering dedication to responsible sourcing and ethical conduct. While acknowledging the competitive edge gained in certain jewelry segments due to the lower tariff, he stresses the significant challenge posed by the 10% tariff on Indian natural diamond exports, especially when other major trading centers enjoy duty-free access.

Competitive Advantages for Indian Exporters

India's placement in the 10% tariff bracket gives it a notable competitive edge against countries like China, Hong Kong, and the UAE, which are now subjected to a 12.5% tariff. This 2.5% difference in tariffs could enhance India's market share in the U.S. for specific jewelry items.

Persistent Hurdles for the Indian Gem and Jewellery Industry

The sector continues to face significant challenges. Natural diamonds originating from India are still subject to a 10% duty, unlike those from the European Union (specifically Belgium), which enjoy a 0% additional tariff. Furthermore, jewelry exports will incur an effective import duty of approximately 15.5%–16%, combining the existing U.S. Most Favored Nation (MFN) duty of 5.5%–6% with the additional 10% Section 301 tariff. Laboratory-grown diamonds and synthetic stones are also affected by this 10% additional tariff. Even rough diamonds, if substantially processed in India, face the Section 301 tariff upon export to the U.S., despite several diamond-producing nations being exempt from these actions.

GJEPC's Forward-Looking Strategy to Address Tariff Disparities

The GJEPC is actively advocating for the exemption of natural diamonds and colored gemstones from the additional tariffs, considering their crucial role as raw materials for the jewelry manufacturing industry. The Council is also diligently working with the Indian government to expedite a Bilateral Trade Agreement (BTA) with the U.S. to bridge the existing tariff gap and bolster the competitiveness of India's gem and jewelry exports in the American market.