Natural Diamonds at 0% Duty - What the New Tariff Structure Means for Exporters in 2026

Why Natural Diamonds Benefit Most and Lab-Grown Don’t

Now this is where the policy gets rather interesting. Not all diamonds are equal under this trade deal. And it’s not by size, clarity, or cut. But by something far more fundamental.

Under Annex III of the US Executive Order, only those goods that cannot be produced domestically are given zero duty. And that’s exactly the case with natural diamonds. They are, by their very essence, mined from the earth. The US does not have any significant diamond mining industry. They are an imported product. And that’s why they are included on the list.

Lab-grown diamonds, on the other hand, are produced domestically. So they are not included under Annex III. And even after this deal, lab-grown diamonds coming from India will be subject to an 18% duty.

And for those makers of high-value natural diamonds – 1 carat, 2 carat solitaires – this is a transformational change. As Adil Kotwal, President of the SEEPZ Gems & Jewellery Manufacturers’ Association, puts it: “An 18 percent duty on a larger natural diamond would have increased the price of finished jewelry to consumers in America. At 0 percent, the math changes entirely.”

And What About Finished Jewelry?

 Finished pieces such as rings, pendants, and bracelets do not enjoy the same zero-duty status. They face a 24% duty (18% reciprocal + 6% MFN), which is an improvement over the previous 31%, but still represents a cost advantage to entering the US market with loose, cut natural diamonds rather than finished pieces.

One astute structural advantage to mention is that if the jewelry is cast in the US and then sent to India to set the stones or finish the pieces, they qualify as “US origin” under the “substantial transformation” doctrine. They come back to the US duty-free. This creates a fascinating hybrid model that some US-India jewelry businesses are already taking advantage of. And What About Finished Jewelry? Finished pieces such as rings, pendants, and bracelets do not enjoy the same zero-duty status. They face a 24% duty (18% reciprocal + 6% MFN), which is an improvement over the previous 31%, but still represents a cost advantage to entering the US market with loose, cut natural diamonds rather than finished pieces.

One astute structural advantage to mention is that if the jewelry is cast in the US and then sent to India to set the stones or finish the pieces, they qualify as “US origin” under the “substantial transformation” doctrine. They come back to the US duty-free. This creates a fascinating hybrid model that some US-India jewelry businesses are already taking advantage of.

How This Reshapes India’s Position in the Global Diamond Trade

India has always been the backbone of the global diamond cutting and polishing trade. Out of every ten diamonds that are polished across the globe, nine of those diamonds are handled by Indians, most of whom are based in Surat, with others in Mumbai, Navsari, and Bhavnagar.

In the past year or so, however, this competitive advantage of India had been negated due to tariff arithmetic. With a 25-50% duty in place, it had become impossible for Indian polished diamonds to compete with those that were being imported through duty-friendly countries such as Belgium, Israel, the UAE, or even those that were already warehoused in the US.

With natural diamonds going to 0%, the tables are turned in favour of India again.

Now, with natural diamonds heading to 0%, the competitive dynamic flips back strongly in India’s favour.

1] Direct Cost Advantage over Lab-Grown Suppliers

In the US, natural diamonds will enjoy a 0% duty, compared to 18% on lab-grown stones, even if sourced from India. This can be a powerful marketing tool for those retailers who focus on natural stones.

2] Re-establishes parity with Belgium and Israel

EU diamonds have historically enjoyed duty exemption under existing Annex III rules. With the new rules, Indian exporters now enjoy parity with their competitors in Belgium and Israel.

3] India’s financing advantage adds on to the advantage

Indian exporters enjoy a 2-6 months credit term, as opposed to their Asian competitors, who require pre-payment. With a 0% duty, this can be a powerful advantage in the US market.

4] Surat’s scale kicks back in

The scale capacity in Surat, which is currently not being utilized to full potential due to the slowdown in trade, is a huge advantage for Indian suppliers.

5] Coloured gems have the same advantage

Natural rubies, sapphires, emeralds, and other coloured gems, which are cut in India, have the same advantage of being able to import at 0%. This is a huge opportunity beyond just diamonds.

What This Means If You’re Buying or Sourcing Diamonds in the US

If you’re a US jeweler, retailer, wholesaler, or importer, this policy change affects your bottom line in a very real way. Here’s the unvarnished truth.

For most of 2025, buying Indian Cut Natural Diamonds meant paying a 25% tariff in addition to the actual cost of the stones. So, a $10,000 diamond cost you $12,500. Either you eat the difference or you pass it on to your customer. Neither is good business.

When the agreement is signed, and the 0% tariff is in place, you no longer have to pay this extra cost. The $10,000 diamond now costs you $10,000. The economics of buying fresh-cut Indian diamonds, which have some of the highest polish in the world, return to equilibrium.

The Bigger Global Picture

If we take a slightly broader view, it is possible to see that this is, in fact, part of a shifting world landscape in the way in which the global supply chain for diamonds is being realigned. The world in which frictionless global trade is possible has effectively been interrupted. The countries which previously only competed on the basis of their skill set now have to compete on trade.

India is a zero-duty supplier of natural diamonds, taking advantage of their financial, design, and cutting expertise. This creates a powerful one-stop shop advantage in the supply of natural diamonds to America, which is extremely difficult to beat.

For buyers who have effectively diversified their supply base in 2025 to counteract the effects of tariffs, 2026 is a powerful opportunity to reassess strategy.

What Should Exporters and Buyers Do Right Now?

This is not a time to wait, observe, and then act. Here’s a practical approach for both sides to take.

Indian Exporters: Re-engage US buyers.

The last year has created distance. US buyers have shifted to other sources. This is the time to proactively re-engage them, not after the order but before it. Inform them about what’s to come and why Indian suppliers are worth re-engaging.

Indian Exporters: Focus on high value naturals (1ct+)

The zero-duty benefit will have its maximum impact on larger stones, as the tariff burden was most severe there. Highlight your offerings in this category to US wholesalers and retailers.

US Buyers: Start planning your pipelines

You don’t have to wait for the actual signing of the agreement to initiate this process. Start establishing Indian relationships, negotiate a price, and get ready to act quickly as soon as the signing is done.

Both sides: Track GJEPC communications closely. GJEPC is the primary body clarifying how Annex III applies and when the 0% rate officially takes effect. Subscribe to their updates and don’t rely on secondhand information.

Jewelry brands: Revisit the US-cast + India-set model For finished jewelry, the hybrid structure (casting in the US, setting in India) remains duty-free and may offer a cost-effective path for higher-end finished pieces.

Read How 0% Duty on Natural Diamonds Impacts the Global Jewellery Industry