MUMBAI, India: India's jewellery exporters are facing their toughest year in over a decade as fresh U.S. tariffs threaten to cut off access to their most lucrative market.

The US$32 billion gems and jewellery industry, a major contributor to India's export economy, is bracing for a sharp decline in overseas sales after the United States imposed a steep 26 percent tariff on Indian jewellery imports. The move is part of President Donald Trump's broader tariff strategy, aimed at countries with significant trade surpluses.

"The tariff is higher than expected," said Colin Shah, managing director of Kama Jewelry, one of India's top diamond jewellery manufacturers. "It is quite severe and will affect exports."

The U.S. is by far the largest buyer of Indian jewellery, accounting for nearly $10 billion—or 30.4 percent—of total exports. India, which accounts for 90 percent of the world's diamond cutting and polishing, has long relied on its skilled workforce and established trade ties with American retailers.

Gems and jewellery rank as India's third-largest export category to the U.S., following engineering and electronic goods. The sector employs millions of workers and is already grappling with weakening demand from China and other global markets. Overall exports dropped 14.5 percent to $32.3 billion in the 2023–24 financial year.

A trade agreement with Washington could offer some relief, according to industry leaders.

"We are pretty hopeful that India could land a trade deal with the U.S. in the next few months. So, we just need to push through this tough phase for a little while longer," said Shaunak Parikh, vice chairman of the Gem and Jewellery Export Promotion Council (GJEPC).

Such a deal, if reached, could reduce or eliminate the tariffs and restore the competitiveness of Indian exporters in the U.S. market.

"A long-term bilateral trade deal with the United States could help soften the blow," Shah added.

Until then, the industry will face an uphill battle, navigating shrinking margins, rising costs, and the possibility of losing market share to competitors in countries not affected by the new duties.