US retaliatory tariffs major setback for Indian gems, jewellery exports: Industry

The US retaliatory tariffs are a major setback for the Indian gems and jewellery exports, apex industry body GJEPC said on Thursday as it urged the government to take steps to secure the long-term interest of the sector.

The US has announced 27 per cent reciprocal tariffs on India saying New Delhi imposes high import duties on American goods, as the Donald Trump administration aims to reduce US' trade deficit and boost manufacturing.

The Trump administration's announcement of a 27 per cent reciprocal tariff on India would be a significant burden on Indian exporters and American consumers alike, the Gem and Jewellery Export Promotion Council (GJEPC) said in a statement.

"In the long-term, we foresee a reshaping of global supply chains. In the short-run, we anticipate challenges in sustaining India's current export volume of USD 10 billion to the US market.

"We urge the government of India to progress the Bilateral Trade Agreement between India and the US, as it would be crucial in navigating the tariff issues and securing long term interest of the sector," GJEPC added.

The US imports USD 11.58 billion gems and jewellery from India and exports USD 5.31 billion to the latter. The total bilateral trade between the US and India in the gems and jewellery sector is USD 16.89 billion.

Bilateral trade between India and the US includes natural and lab grown polished diamonds, gold and platinum jewellery, silver jewellery, imitation jewellery, rough diamonds, rough LGD, rough coloured gemstones, gold bar, silver bar and platinum bar, coloured gemstones.

Kama Jewelry MD Colin Shah said, it's a big setback for India as the US has announced retaliatory tariffs.

"While in the broader sense, it will be 27 per cent, the Gems and jewellery sector will be the most affected as import tariffs may be up to 20 per cent from the current '0' per cent on loose diamonds and 5.5-7 per cent on gold jewellery," Shah said.

Shah further noted that the US is one of India's largest jewellery export markets, accounting for almost 30 per cent of the share. Indian jewellery exports to the US are over USD 11 billion per year.

Experts said the retaliatory tariffs will significantly impact India's diamond and jewellery sector -- a cornerstone of its exports to the US, said the Council.

"India currently imposes a 20 per cent import duty on gold, silver, and platinum jewellery from the US. Efforts should be made to rationalise import duty as well as balance trade with all major nations.

Import duties help protect local industries, but the retaliatory tariffs will end up negating this step by most governments," he added.

Echoing sentiments, Saurabh Gadgil, Chairman and Managing Director, PNG Jewellers, said the tariff imposed by the Trump administration will hit Indian jewellery exporters.

"As far as domestic consumption of gold is concerned, neither is India an importer of gold nor jewellery from the US. So, as far as PNG Jewellers' business is concerned, we won't face any impact," he said.

He added that on the contrary, the US imports a lot of goods and commodities from Asia, which will invariably become more expensive now.

Therefore, there remains a catch on the Trump administration's objective of bringing in more dollars to check their debt, as the prices of the same goods, now expensive, may cause inflation in the US and further slowdown the economy, he noted.

EY India Partner and Retail Tax Leader Paresh Parekh said that the Indian gems and jewellery sector has been struggling since the last few years due to changing customer preferences, lab grown diamond technology, demonetisation, soaring gold prices, and competition for polishing from other countries.

The US Tariff developments now create an additional adverse impact on the gems and jewellery sector, with real risk of job losses and margin erosion, he said.

"The exposure to the USA for this sector is huge - over USD 11.5 billion - almost 13 per cent of the sector exports are to the USA, which is around 30 per cent plus of its total exports.

"Till now, India's tariffs on gold jewellery imports are around 20 per cent which is higher than the US import tariff (over 5 per cent). Earlier, the US levied 0 per cent tariff on cut and polished diamonds while India levied 5 per cent. The industry hopes the government of India covers this sector in its negotiations for a trade deal with the USA," Parekh stated.

Meanwhile, All India Gem and Jewellery Domestic Council (GJC) Chairman Rajesh Rokde said, "The gem and jewellery sector, with its reliance on delicate global collaborations, faces challenges that call for strategic foresight. It's not just about navigating the cost but understanding how these shifts recalibrate the competitive landscape globally."

GJC vice chairman Avinash Gupta state that the Reciprocal tariffs are poised to significantly disrupt the Gem and Jewellery industry worldwide.

"While we must keep our fingers crossed, the ripple effects of such measures will span across nations. It's crucial to evaluate how deeply they will impact us in comparison to other countries, and to observe how the United States navigates this unprecedented surge," he added.