Is the hardest metal crumbling under US tariff pressure?

Diamonds may be forever, but the current market is anything but stable. A new 10 per cent US tariff on polished diamond imports has added significant strain to a global diamond industry already under pressure from declining Chinese demand and the rapid rise of lab-grown alternatives. As one of the world’s most globalised luxury sectors, the diamond trade is now navigating a complex web of geopolitical, economic, and consumer-driven shifts.

Announced in early April, the tariff announced by US President Donald Trump applies to a wide range of goods, including natural polished diamonds, but excludes metals such as gold and copper.

The immediate impact was a scramble across key trading hubs like Antwerp, with exporters rushing to ship inventory before the tariffs took effect. India, the largest exporter of cut and polished diamonds, saw a fivefold surge in US-bound exports from April 1 to 4, reaching $512 million. Yet despite the rush, April exports of cut and polished diamonds fell 6.12 per cent compared to the previous year, according to data released by the Gem and Jewellery Export Promotion Council (GJEPC).

Unlike commodities sourced and processed in a single location, diamonds often travel extensively. A single stone might be mined in Botswana, polished in India, certified in the US, and sold in Europe. The 10 per cent import duty adds cost at the final leg of that journey—a price increase that traders warn will ultimately be borne by consumers, especially in the US, which accounts for more than half of the global diamond demand.

Retailers in the US are already pushing the added burden onto suppliers. Financial Times recently reported that Signet Jewellers, the largest diamond retailer in the country, told vendors it would not pay any additional costs linked to the new tariff on existing purchase orders. The company urged its partners to expedite shipments into the US to mitigate the financial fallout.

The broader industry remains in a holding pattern as the White House has paused additional reciprocal tariffs for 90 days, pending further negotiations. But the initial 10 per cent duty remains active, and uncertainty is undermining confidence across the global supply chain.

Consumer pressure and competitive headwinds

Tariffs are hitting at an especially sensitive moment for the sector. Inflation and a softening in consumer sentiment have already begun to dampen discretionary spending. According to the Bureau of Economic Analysis, US consumer spending on jewellery and watches fell 5 per cent year-on-year in the first quarter of 2025. The National Retail Federation has forecast retail growth to slow to between 2.7 per cent and 3.7 per cent this year, compared to 8.1 per cent in 2024.

Against this backdrop, the popularity of lab-grown diamonds (LGDs) has surged. These diamonds are chemically identical to natural diamonds but up to 80 per cent cheaper. LGDs now appear in over half of US engagement rings, according to The Knot’s 2025 Real Weddings study. Their rise has played a major role in the nearly 60 per cent decline in natural diamond prices since their peak in early 2022.

To combat this, some traditional players are consolidating their strategies. De Beers, for example, has opted to shut down its LGD jewellery brand Lightbox to refocus on natural stones. The company’s parent, Anglo American, has written down De Beers’ value by $4.5 billion over the past two years and is currently preparing it for a possible spin-off or sale.

China demand falters, India rises

Compounding the industry’s challenges is a steep contraction in Chinese demand. Once a key driver of luxury consumption, China’s diamond market has shrunk significantly amid macro- and microeconomic challenges.

Data from the Gems & Jewelry Trade Association of China shows that the market fell from RMB 100 billion ($13.88 billion) in 2021 to just RMB 43 billion ($55.52 billion) in 2024—a staggering 57 per cent decline. Gem-quality diamond imports dropped 73 per cent by volume and 83 per cent by value over the same period, signalling severe price erosion.

The decline in China’s demand has had global consequences, as it was the world's second-largest diamond market. India, however, is emerging as a counterweight to China’s slowdown.

While India’s exports are down, India’s domestic market is showing double-digit growth, making it the world’s second-largest diamond consumer behind the US. According to industry experts, India’s rise has helped offset some of the global demand slump. Still, the growth is not enough to fully balance the downturn in China with the volatility in the US.

Fragile supply chain faces uncertain future

The global diamond supply chain—already stretched by pandemic-era disruptions—is particularly vulnerable to trade barriers. A typical diamond passes through several borders: mined in parts of Africa, traded in the Middle East or Europe, polished in India, certified in the US, and sold in retail outlets globally. Tariffs, therefore, do more than add cost; they risk unravelling the finely tuned logistics of the entire ecosystem.

Adding to the complexity is the uncertain legal treatment of diamonds under US trade rules. While other commodities like gold and copper are exempt from tariffs, loose diamonds are currently included, despite being viewed by some as a raw material. Industry groups like the World Diamond Council are lobbying for exemption, warning that the tariffs could act as a consumption tax and dampen sentimental purchases such as engagement rings and anniversary gifts.

The global diamond industry faces a crossroads. Tariffs and geopolitics have joined falling demand and technological disruption as key forces shaping the future. Analysts predict a bifurcation of the market, with premium natural diamonds becoming niche luxury items, while lab-grown stones dominate the mass market.

For now, even the hardest substance on Earth is proving vulnerable to the softening forces of economics and policy.