India's $32 billion gems and jewellery industry is confronting a significant downturn following the United States' imposition of a 26% reciprocal tariff on Indian imports. This development is particularly impactful as the U.S. serves as the largest market for Indian jewellery, accounting for nearly $10 billion, or over 30%, of the sector's annual exports.
The newly enacted tariffs are part of President Donald Trump's broader trade policy aimed at addressing trade imbalances and non-reciprocal practices. While India's gems and jewellery industry is already grappling with weakened demand from key markets like China, this additional tariff exacerbates the challenges faced by exporters. In the fiscal year 2023-24, the industry witnessed a 14.5% decline in exports, underscoring the sector's vulnerability.
Industry leaders have expressed concern over the severity of the tariff's impact. Colin Shah, Managing Director of Kama Jewelry, described the 26% tariff as "quite severe," emphasizing its detrimental effect on exports. Similarly, Shaunak Parikh, Vice Chairman of the Gem and Jewellery Export Promotion Council (GJEPC), highlighted the urgency of securing a bilateral trade agreement with the U.S. to mitigate these adverse effects.
The broader context reveals that the U.S. has imposed varying tariff rates on different countries, with India facing a 26% tariff, which is lower than the tariffs imposed on some other Asian nations. For instance, China and Vietnam are subject to tariffs of up to 54% and 46%, respectively. Despite this relative positioning, the impact on India's export sectors, particularly gems and jewellery, electronics, and auto parts, remains substantial.
In response to these developments, Indian Commerce Minister Piyush Goyal has traveled to the United States for discussions aimed at addressing the impending tariffs and exploring avenues for a mutually beneficial trade agreement. Both nations have previously expressed intentions to work towards an initial trade deal, targeting bilateral trade of $500 billion by 2030.
As negotiations continue, stakeholders within India's gems and jewellery industry remain hopeful for a resolution that could alleviate the current trade tensions and restore favorable conditions for exports to the United States.