This content was first published on IGR – Italian Gemological Review no. 22 in 2026. The information provided here is therefore current as of the original publication date.
The whirlwind of U.S. trade measures has left entire global supply chains reeling. Gemstones are no exception. The United States has long been the primary export destination for India’s cut and polished diamonds: before 2025, between 50% and 60% of India’s diamond exports — largely concentrated in the Surat district — were shipped to the U.S., with an estimated annual value of $11–12 billion. Polished diamonds had benefited from duty-free access since 2003, while finished jewelry and colored gemstones were subject to relatively modest duties, generally ranging from 0% to 7%.
That equilibrium unraveled with the return of Donald Trump to the White House and the introduction in 2025 of a “reciprocal” tariff policy. From that moment, duty rates began to shift with disorienting speed: 10% in April 2025, above 50% by August, accompanied by announcements, suspensions and reinstatements that made contract pricing and forward planning nearly impossible. Natural diamonds, lab-grown stones, colored gems and jewelry alike were swept into a cycle of abrupt increases, turning a historically stable trade corridor into a zone of structural uncertainty.
The impact on India’s industry has been severe. In the first quarters of fiscal year 2026, diamond exports fell by 64%, while colored gemstone exports declined by 53%. Overall exports to the United States dropped between 50% and 75%, putting at risk a sector employing between 1 and 2 million workers. Beyond the level of the tariffs themselves, it was their unpredictability that proved most damaging: orders were postponed, shipments delayed, and contracts renegotiated within weeks. In response, many companies began exploring tariff circumvention strategies through commercial triangulation.
The proposed mechanism involved shipping rough or semi-processed diamonds to a third country, completing a qualifying manufacturing step there, and then exporting the goods to the United States under a different country of origin. Central to this approach is the U.S. customs concept of “substantial transformation”: only a process that changes the name, character, or use of a product alters its origin. For diamonds, cutting, faceting and polishing constitute substantial transformation; minor finishing or simple setting in jewelry does not. In cases of transshipment violations or fraud, U.S. authorities may impose penalties of up to 40%.
In this context, Mexico initially appeared to offer a viable workaround. Under the USMCA agreement, products qualifying as “Made in Mexico” can enter the U.S. duty-free if they meet rules-of-origin requirements. The idea was to ship rough or semi-cut stones from India, complete the processing locally, and re-export them to the United States without tariff burdens.
That window closed quickly. In December 2025, the Mexican Senate introduced duties of up to 50% on numerous imports from India, effective January 1, 2026, to prevent Mexico from becoming a backdoor to the U.S. market. As a result, triangulation became economically fragile, particularly for small and mid-sized firms.
The situation differs in Antwerp and across the European Union, where diamonds continue to benefit from zero-duty treatment. Belgium remains a major trading and processing hub, but only if the manufacturing performed meets the “substantial transformation” threshold; otherwise, the diamond retains Indian origin and remains subject to U.S. tariffs.
With the Mexican route effectively blocked and U.S. customs scrutiny tightening, India’s industry has accelerated diversification toward the EU, Dubai and other trading hubs.
A further twist came in early February 2026: under an interim agreement between Washington and New Delhi, tariffs on diamonds and colored gemstones were reduced to approximately 18%. While significantly lower than the 2025 peak, this does not yet restore the pre-crisis duty-free regime. Nor does it guarantee stability. Full implementation depends on the conclusion of a comprehensive trade agreement between the United States and India, itself part of a broader realignment of trade relations among America, Europe and Asia. In such a volatile environment, uncertainty remains the industry’s only constant.
Gem news published on IGR – Italian Gemological Review #22 – Spring 2026.
