A sudden 26% tariff imposed by the U.S. administration on Indian gems and jewelry has effectively brought exports to a standstill, leaving industry leaders scrambling and buyers hesitant, according to sector representatives. The industry now hopes for a swift resolution through government negotiations within the next three months.

“Starting tomorrow, I don’t see any exports going to the USA,” said Adil Kotwal, Chairman of the SEEPZ Gems and Jewellery Manufacturers’ Association (SGJMA). “Everybody has told us to put all orders on hold. They have told us to manufacture it and keep it ready for them.”

The short-term consequences are expected to be substantial. Approximately 64% of jewelry exports from SEEPZ, amounting to roughly $3.5 billion, are destined for the U.S. market. The tariff hike, escalating from 6% to 26%, has significantly increased upfront duties, placing pressure on exporters’ liquidity. For a million-dollar consignment, duties have surged from $60,000 to $320,000.

U.S. retailers, having recently stocked up for Mother’s Day, are currently refraining from placing new orders. “Retailers in the United States right now have enough stock for the next three months, so they are not in any rush,” Kotwal noted.While bilateral talks continue, industry leaders remain optimistic about a timely resolution. “The government has been in touch with us. And I believe that in the next three months, some resolution should come about,” Kotwal said. He added that the Indian government is advocating for a bilateral trade agreement, and that, while the 26% tariff is deemed unsustainable, a 10% rate would be more acceptable to the sector. “I think around 10%, we’ll all be very comfortable with that.”

Beyond the U.S., exporters are monitoring other key markets. Ray noted that initial optimism following the Hong Kong show in March regarding diamond exports to China has been overshadowed by the new tariff uncertainty. “If you are looking at the two big upper-end diamond markets, they are the US and China. That’s where the focus is,” he explained.

The Middle East, another important market for Indian gold jewelry, faces challenges due to rising gold prices and concerns about crude oil and consumer spending, adding to the sector’s concerns.

The industry is now anticipating a difficult period while awaiting the outcomes of trade discussions. With the U.S. accounting for $10 billion of India’s gems and jewellery exports in FY24, a resolution is deemed crucial for the sector’s long-term health.