Liberation or Inflation? What Trump’s Tariffs Mean for the Diamond Trade

Wishing those who celebrate a meaningful Passover and Easter — both festivals commemorating historic and biblical stories of liberation and redemption.

Speaking of which, with the benefit of an extra week to reflect, what are we to make of President Donald Trump’s April 2 “Liberation Day” tariffs?

The president paused the implementation of higher reciprocal tariffs — originally scheduled for April 9 — for 90 days. The announcement brought a collective sigh of relief to the diamond and jewelry trade, equally felt in Surat, New York, Antwerp, Ramat Gan, and Gaborone.

For now, at least, the move levels the playing field for suppliers to the world’s largest diamond jewelry market.

That’s a critical point to start with: the US accounts for just over half of global demand for diamond jewelry. The industry depends heavily on the American consumer.

We must keep that in mind as we assess the impact of the 10% tariffs that took effect on April 2 — both at the wholesale level and at retail. Ultimately, it’s retail demand that matters most, given the size and influence of the US market.

At the wholesale level, we saw a rush to move goods to the US between April 2 and April 9, ahead of the now-paused higher tariffs. Polished prices also rose as dealers baked in the expected increase in costs.

That’s not the usual way prices rise. Typically, they respond to stronger demand or tighter supply. Still, passing on higher costs is a natural market reaction, and with a 10% rise in cost now baked in, we are likely seeing a new higher base polished price level forming.

However, whether the momentum holds will depend on demand — which brings us back to retail. In the short term, tariffs are expected to stoke inflation, while ongoing uncertainty fuels caution among consumers and businesses alike.

Jewelers are likely to adjust prices upward to reflect their increased costs. That, in turn, will curtail consumer spending on jewelry — particularly among the middle- and lower-income segments, which are already shifting to lower price points. But the broader concern is the rising cost of living, which leaves households with less to spend on discretionary items like jewelry. We’re likely to see savings as a percentage of income shrink.

That’s not to say the tariffs are inherently bad. There may be longer-term benefits. They could boost US manufacturing, encourage consumers to buy local, and potentially generate more government revenue to help reduce national debt or even lower taxes — as Trump and his proponents argue.

They are also intended to create leverage in trade negotiations, potentially leading to lower tariffs on US exports and recalibrating global trade relationships — barring escalation in the US-China trade war.

In the diamond industry specifically, these shifts may nudge India to finally remove its 5% duty on polished imports — a change the Indian trade has long advocated. Doing so would allow Mumbai and Surat to become broader trading hubs, opening India’s growing domestic market to more global suppliers.

But in the end, all eyes are on the US consumer. That’s who the industry will be watching most closely as all this plays out.

Will this policy ultimately help liberate the US economy? Time will tell. As the president himself acknowledged, there may be some pain before any gain. In the meantime, the diamond trade should prepare for a period of consumer restraint. That could put downward pressure on polished prices, potentially reversing the recent increases — even as higher import costs remain in place.

Chart Check

India’s diamond trade reflected the caution that defined the global industry in the first quarter. As the world’s largest diamond manufacturing center — responsible for 80% to 90% of global polished supply — its rough imports and polished exports offer a telling snapshot of market conditions.

Rough imports dropped 33% year on year to $2.79 billion during the quarter. The rough market has stabilized at lower levels after major miners — i.e. De Beers — curbed supply in the second half of 2023, allowing manufacturers to gradually reduce their polished inventories.

Polished exports declined 12% to $3.54 billion, weighed down by weak Chinese demand, rising competition from lab-grown diamonds, and continued caution from US jewelers, despite relatively steady sales in 2024.

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What I’m Listening To

Insightful discussion between JCK Online editors Rob Bates and Victoria Gomelsky and Signet Jewelers CEO J.K. Symancyk: The Jewelry District.

Coming Up

• LVMH 1Q revenue: April 14

• Rio Tinto 1Q operations review: April 15

• Chow Tai Fook FY4Q operational Data: April

Pic of the Week

Image: Christie’s unveiled The Golconda Blue, which it claims is the largest fancy vivid blue diamond ever to be offered at auction. The pear-shape, 23.24-carat diamond will headline the Christie’s Magnificent Jewels sale in Geneva on May 14, with a pre-sale estimate of $35 million to $50 million. (Credit: Christie’s).