US tariff relief adds sparkle to Indian diamond trade as polishers eye 6-7% revenue growth; Mideast conflict a concern

The United States has removed a 25% tariff on Indian gems and diamonds, a move that is expected to bring much-needed relief to the country's diamond polishing industry. The decision is likely to support export growth and improve demand for Indian cut and polished diamonds in the American market.

With the reciprocal tariff on Indian gems and diamonds now effectively reduced to zero, diamantaires are eyeing a 6-7% year-on-year revenue growth for the sector in fiscal 2027 to $15.0-15.5 billion, according to Crisil Ratings.

However, the credit rating agency cautioned that the escalating conflict in West Asia could limit the extent to which diamond polishers benefit from the tariff relief, as geopolitical tensions may disrupt trade flows.

“Given that polishers import 70% of roughs from the UAE and Israel and exports 20% to them, the Middle East conflict may temporarily impact shipments. Other trading hubs may support shipments in case the conflict prolongs, like past tariff disruptions," said Rahul Guha, senior director of Crisil Ratings.

As a result of the trade disruptions, the share of India's direct polished diamond exports to the United States fell to 16% in the first nine months of fiscal 2026, from 35% in fiscal 2025.

The reciprocal tariff prompted diamond polishers to increase production before the deadline and explore alternative trading hubs such as the United Arab Emirates (UAE), Hong Kong, Thailand and Canada, which helped in mitigating the impact, according to Crisil Ratings.

The uptrend will follow three consecutive years of degrowth as the sector is expected to record lower revenue in fiscal 2026, too. At $14.0-14.8 billion, revenue will be 8-10% lower y-o-y in the current fiscal due to volatility in duty and competition in the lab-grown diamonds segment, the agency said.

However, there's a headwind that may disrupt the demand for natural diamond demand, as it is facing growing competition from economical lab-grown diamonds, which have similar characteristics to the real gem.

As a result, prices for rough and polished natural diamonds below 1.5 carat continue to decline, while prices of diamonds above 1.5 carat have sustained due to steady demand amid premiumisation.

While controlled production by miners has limited the fall in prices, competition from lab-grown diamonds, now 60% of US volume, will cap operating profitability at 4.25-4.50%, the agency said.