After nearly six months of trade uncertainty, a meaningful de-escalation in US–India trade tensions has delivered a timely lifeline to India’s gems and jewellery exporters. The United States, which accounts for roughly 30% of the industry’s export sales, has reduced tariffs on Indian gems and jewellery to an effective 18% from the earlier 50%, a move that materially alters the cost dynamics for Indian shipments.

The tariff cut comes at a point when the sector was experiencing one of its sharpest export slowdowns in recent years. Between April and December 2025, India’s gem and jewellery exports to the US fell 44.42% year-on-year to $3.86 billion from $6.95 billion in the same period last year. The pressure intensified in December 2025, when exports to the US plunged 50.44% year-on-year, reflecting both tariff stress and weak discretionary demand in the American retail market.

For an industry where margins are thin and price competitiveness is decisive, the earlier doubling of US duties to 50% had effectively eroded India’s relative advantage. In FY25 alone, India exported close to $10 billion worth of gems and jewellery to the US, of which diamonds accounted for $7–8 billion. With such concentration, the tariff shock did not just dent volumes; it created structural anxiety about overdependence on a single geography.

Gems and jewellery rank as India’s third-largest export category to the US after engineering and electronic goods, and the sector directly and indirectly supports millions of livelihoods, particularly in Gujarat, Maharashtra, Rajasthan and parts of southern India where cutting, polishing, and jewellery fabrication clusters operate at scale. Industry bodies had warned that sustained high tariffs could force shipment deferrals, working capital stress, and job losses, especially among small and mid-sized exporters operating on wafer-thin spreads.

The latest tariff revision changes the equation immediately. An 18% effective duty restores significant pricing parity for Indian exporters versus competitors from other jewellery-exporting nations. This is expected to revive stalled orders, clear pending inventories, and restart shipment cycles that were deferred over the past two quarters.

At a policy level, the trade adjustment also signals a broader reset in US–India economic engagement. While India has agreed to reduce tariffs and non-tariff barriers on American goods as part of the arrangement, the immediate commercial beneficiary is the labour-intensive gems and jewellery value chain that was caught in the crossfire of trade tensions.

The development also intersects with India’s ongoing push for export market diversification. The industry has been actively looking at alternative markets through recent and proposed free trade agreements with the UK, Oman, New Zealand and other partners. These agreements aim to reduce duties and ease compliance barriers, providing exporters with new destinations that can offset excessive reliance on the US.

In an earlier note, the Gem & Jewellery Export Promotion Council had expressed confidence that ongoing trade negotiations would open new markets and strengthen India’s position globally on quality, value and trust. The latest US tariff reduction validates that expectation and may embolden exporters to pursue a two-pronged strategy: regain lost ground in the US while accelerating geographic diversification.

For Indian exporters, this is not merely a tariff reduction; it is a restoration of order flow visibility. Jewellery demand in the US is discretionary and seasonal, often linked to holiday cycles. High tariffs had disrupted buying patterns for American retailers who either delayed procurement or shifted sourcing. With duties lowered, Indian suppliers can again compete on price and delivery timelines, which could normalise trade flows over the coming quarters.

From a macro perspective, gems and jewellery are a critical contributor to India’s merchandise export basket and foreign exchange earnings. A recovery here can cushion the impact of weakness seen in other export segments and improve overall export momentum at a time when global demand remains uneven.

Listed jewellery exporters and diamond processors could see sentiment improvement as order pipelines revive. Working capital cycles may ease as shipments resume and inventory overhang reduces. Banking exposure to SME exporters in this segment may also see lower stress if trade volumes recover.

The immediate beneficiaries are diamond cutters, polishers, jewellery manufacturers, and export houses concentrated in traditional clusters. Ancillary industries including logistics, certification, packaging, and bullion trade may also see activity pick up.