India's Gems and Jewellery exports face 50% US tariff risk

India's Gems and Jewellery (G&J) exports face a concentrated risk from a 50% United States tariff because the US accounted for over 32% of the sector's FY25 exports. The charge comprises a 25% reciprocal duty and an additional 25% penalty linked to India's continued oil trade with Russia, and the report expects weaker demand for affected jewellery categories.

Why are G&J exports especially exposed to the US tariff?

G&J exports are especially exposed because more than 32% of India's FY25 sector exports went to the US. This destination concentration means that a change in the cost of entering one market can affect a substantial share of G&J export demand, rather than a small peripheral part of the sector's overseas sales.

The report identifies diamonds, gold jewellery, silver jewellery and coloured-stone jewellery as the product groups likely to face demand contraction. The risk arises because the tariff applies to Indian exports entering the US and because the US represented more than 32% of G&J exports in FY25; both conditions must persist for the same level of sector exposure to continue.

G&J also had the largest share among the four listed categories in India's US-bound exports in FY25. The 11.50% figure measures G&J's share of India's total exports to the US, while the more than 32% figure measures the US share of G&J's own exports. These are different measures, but together they show both the category's importance in the US-bound basket and its reliance on US buyers.

What does the 50% US tariff mean for G&J exports?

The 50% US tariff means a combined 25% reciprocal duty and 25% additional penalty on Indian exports, which the report says is expected to disrupt G&J exports. The additional 25% penalty is linked to India's continued oil trade with Russia, and the report expects demand pressure in diamonds, gold, silver and coloured-stone jewellery.

The source describes a demand and market-access risk, not a reported numerical fall in G&J exports. A tariff increases the duty burden on Indian products entering the US, but the size of any export decline will depend on how US demand responds, how buyers treat the additional import cost and whether G&J exporters can sell into other markets.

The tariff's effect on G&J exports can differ from its effect on India's economy because exposure is concentrated by sector. Goods exported to the US are about 2% of India's gross domestic product, or GDP, according to the report, while CARE's analysis estimates direct export losses from the higher tariffs at around 0.3% to 0.4% of GDP. That economy-wide estimate does not quantify an export loss for G&J.

How does the G&J risk compare with India's wider export exposure?

G&J exports face a more concentrated risk than India's wider export trade because the US took over 32% of the sector's FY25 exports, while US-bound goods equalled about 2% of national GDP. The report therefore expects the aggregate impact of US tariffs on India's export trade to be minimal even as it identifies G&J as a sector with potentially high exposure.

The report lists engineering goods, electronics, G&J, pharmaceuticals, textiles and automobiles among sectors that could be affected. It says the affected sectors account for a small fraction of India's total exports, which is a broader measure than the more than 32% US share within G&J exports in FY25.

Other categories illustrate why tariff effects vary by product and market. Steel faces 25% tariffs, but the report expects a limited effect because India's exported volume is lower, whereas textiles could benefit from reduced competition. G&J has a 50% tariff exposure and a US destination share above 32%, so its outcome depends more directly on demand in that single market.

The International Monetary Fund forecasts India's GDP growth at 6.70% in CY26, compared with an estimated global average of 3.06%. The 3.64-percentage-point difference supports the report's assessment of India as largely domestic-driven, but domestic growth does not eliminate the US demand risk for G&J exporters.

What could reduce the tariff impact on G&J exports?

Export diversification and progress in US-India trade discussions could reduce the tariff impact on G&J exports, according to the report. India is pursuing diversification into markets including the European Union, or EU, and the Association of Southeast Asian Nations, or ASEAN; reducing US concentration would require those efforts to produce sales beyond the market that accounted for over 32% of FY25 G&J exports.

India's relatively lower tariff structure is cited as a factor enhancing its attractiveness as a trade partner. The report also says India is more competitive than China, Taiwan, Bangladesh and Vietnam in textiles, pharmaceuticals, electronics and auto components, although those comparisons do not establish substitute demand for G&J products in the EU, ASEAN or another market.

A multi-sector bilateral trade agreement, or BTA, is the report's disclosed policy route for addressing trade uncertainty. On February 13, Prime Minister Narendra Modi and President Donald Trump discussed raising bilateral trade from USD 200 billion to USD 500 billion by 2030, with BTA negotiations expected to begin later in the year on trade fairness, national security and job creation.

What will determine whether pressure on G&J exports persists?

Pressure on G&J exports will persist if the 50% US tariff continues to apply, US demand falls in affected jewellery categories and the US remains the destination for over 32% of sector exports. The report does not provide a forecast for a decline in G&J export value or volume, so it establishes the sector's exposure rather than a measured loss.

The practical outcome will also depend on whether EU and ASEAN diversification creates sufficient demand and whether the proposed BTA negotiations alter trade conditions. The Union Budget allocation of Rs 12.20 lakh crore for capital expenditure in FY27 supports the report's wider infrastructure-led growth view, but it does not directly offset the tariff burden on G&J products entering the US.

Conclusion

The 50% US tariff creates a disproportionate risk for G&J exports because the US accounted for over 32% of the sector's FY25 exports. CARE's estimate of direct export losses of around 0.3% to 0.4% of GDP describes the national-scale effect, whereas the G&J data show a sector whose sales are materially dependent on one tariff-affected destination.

The next developments to watch are the expected start of multi-sector BTA negotiations later in the year and evidence that EU and ASEAN diversification is generating G&J demand. The USD 500 billion bilateral-trade target for 2030 sets out a stated policy direction, but it remains unresolved whether negotiations or new markets will change the 50% tariff burden and the sector's US dependence.