US and India Forge Trade Agreement, Offering Relief to Jewelry Sector

In a significant development for international trade, the United States and India have announced an interim trade deal framework that promises to lower tariffs on Indian goods imported into the U.S. This agreement, brokered between President Donald Trump and Indian Prime Minister Narendra Modi, is expected to bring substantial relief to the U.S. diamond and gemstone jewelry market, which has been grappling with high import taxes.

Tariff Reduction and Jewelry Industry Impact

President Trump announced on social media that he and Prime Minister Modi had reached a deal that would reduce the reciprocal tariff on Indian goods from 25 percent to 18 percent. Crucially, this agreement addresses the punitive 25 percent tariff that had been imposed on Indian goods since August, bringing the total tariff rate on some items to 50 percent. This additional tariff was initially levied because India had been importing oil from the Russian Federation.

The U.S. jewelry industry, in particular, stands to benefit significantly. Loose diamonds and gemstones, along with diamond jewelry, are central to this new trade arrangement. Jewelers of America (JA) has been actively lobbying for tariff relief, and this deal is seen as a major step forward. David Bonaparte, President and CEO of Jewelers of America, stated that reaching a trade deal with India is critical for the U.S. market and expressed hope for immediate relief for diamond importers who have been paying a 50 percent tariff.

While the specifics are still being finalized, the agreement suggests that loose rough and polished diamonds and gemstones imported from India could be exempt from tariffs entirely. The tariff on diamond and gemstone jewelry is slated to decrease to 18 percent. This move is anticipated to alleviate the strain on companies facing challenges with working capital, liquidity, and profit margins due to the high taxes.

Background and Key Terms of the Agreement

The path to this interim agreement has been complex. Trade talks began in February of the previous year, with tariffs escalating throughout 2025. A 25 percent reciprocal tariff was implemented in July, followed by an additional 25 percent penalty tariff in August due to India's oil purchases from Russia. In September, following industry lobbying, key items like diamonds, natural pearls, and certain gemstones were added to a list of products eligible for tariff exemption upon the finalization of a trade deal.

The joint statement issued on February 7 (February 6 in the U.S.) outlines several key terms:

• The U.S. will reduce the overall tariff rate on imports from India to 18 percent, effectively removing the 25 percent penalty tariff conditional on India ceasing Russian oil imports.
• India will eliminate or reduce tariffs on U.S. industrial goods, as well as a wide range of U.S. food and agricultural products.
• India has committed to purchasing over $500 billion of U.S. energy products, aircraft and parts, precious metals, technology products, and coking coal over the next five years.
• Both nations will work to address non-tariff barriers affecting bilateral trade and negotiate rules of origin.
• Commitments have been made to strengthen economic security alignment and expand bilateral trade in technology products.

Industry Reactions and Future Outlook

The India Gem & Jewellery Export Promotion Council (GJEPC) has welcomed the proposed deal, calling it a source of immense relief for the country's diamond jewelry manufacturers. The U.S. is India's largest export market for gems and jewelry, accounting for a significant portion of its exports. The GJEPC anticipates that lower tariffs will reduce costs for U.S. importers, boost the competitiveness of Indian diamond jewelry, and help revive demand.

While the overall sentiment is positive, some analysts note that the 18 percent tariff rate is still substantial, and the agreement's benefits might lean more towards the U.S. due to India's commitments to increased U.S. imports. Concerns have also been raised regarding the implications for India's agriculture sector and the potential impact on Indian farmers.

Despite these considerations, the agreement marks a significant step towards a more balanced trade relationship. Both governments are expected to sign a formal Bilateral Trade Agreement (BTA) in March, solidifying the benefits for businesses and consumers in both nations. The U.S. remains committed to challenging unfair trade practices and ensuring reciprocal benefits for American workers and businesses in global trade.