SURAT, India – Ajay Lakum has been a diamond worker his entire adult life, like his father before him. His wages as a sorter were modest, but the work was steady, helping Lakum support his 10-person household and contribute to his mother’s cancer treatments.
About two weeks ago, he was among a group of 20 workers told abruptly not to show up the next day. He has called dozens of companies looking for work, he said, but none are hiring. All he can think about are the bills coming due.
“I am very stressed,” said Lakum, 35. “My mental health is ruined.”
He is a direct casualty of the escalating trade war between the United States and India. Nearly every diamond sold in the world is first cut and polished in the city of Surat, in western Gujarat state. The U.S. is the single-largest buyer of these precious stones, purchasing roughly $5 billion in the last fiscal year, according to India’s Gem & Jewelry Export Promotion Council.
ADVERTISEMENT
But President Donald Trump’s 25 percent tariffs on India, which took effect on Aug. 7 and are set to climb to 50 percent on Wednesday, have brought this diamond town to a near-standstill, according to interviews with workers, merchants and industry analysts. Export orders are on pause. Union leaders estimate 50,000 workers have been laid off since April, when Trump announced a 10 percent baseline duty on nearly all U.S. trading partners and first threatened higher rates on India. Other businesses that serve Surat’s diamond workers, from tobacco sellers to lunch stalls, are also in steep decline.
The industry was already struggling as a result of Western sanctions on Russia, a key supplier of the rough diamonds that pass through the workshops of Surat before being displayed in American showrooms. Now, many fear the tariffs will make Indian diamonds prohibitively expensive for major U.S. jewelry companies and send demand plummeting.
Hopes of a diplomatic breakthrough between Washington and New Delhi look bleaker with each passing day. Trump officials have ratcheted up their rhetoric toward India – accusing the country of profiting from Russia’s war in Ukraine and hurting American workers – and the latest round of trade talks scheduled for this week has been canceled, according to a person familiar with the negotiations, speaking on the condition of anonymity to discuss a sensitive matter.
India’s Commerce Ministry and the U.S. Treasury Department did not respond to a request for comment.
Indian Prime Minister Narendra Modi hails from Gujarat but has prioritized protecting other industries, such as seafood, dairy and agriculture, which employ a majority of the country’s labor force. Diamond workers and business owners in his home state say no one is looking out for them.
“The U.S. tariffs will completely destroy our industry,” said Ramesh Zilriya, president of the Gujarat Diamond Workers Union. He urged the American government “not to impose something that would ruin so many lives.”
– – –
‘We all suffer’
On Kohinoor Road in north Surat, the beating heart of the diamond industry, there is an odd calm. This stretch of road would normally be humming with the sound of scooters, carrying thousands of diamond polishers, sorters and cutters to work.
The city employed between 800,000 and 1 million diamond workers last year, according to the Gujarat Diamond Workers Union, most of them informal laborers not counted in national surveys. Up to 100,000 could ultimately be out of work if Trump’s 50 percent tariffs are enacted, the union estimates.
Vallabh Rathod, 45, the co-owner of a diamond-polishing company on Kohinoor Road, said orders from his American clients have been on hold since Aug. 1, in anticipation of the 25 percent tariff. With the rate set to double this week, he’s not expecting business to pick up any time soon.
On the factory floor, 25 diamond workers now ply their trade, down from the usual 50. “There’s no business,” said Vipul Patel, who has spent a quarter century as a polisher.
To save money on day wages, Rathod told many of his employees to take off six extra days for a recent Hindu holiday. He no longer uses air conditioning in his office, despite the oppressive summer heat. His personal income has fallen from $690 a month to $285 in August, he said.
“If it continues like this,” he said, “we won’t be able to go on.”
Amit Korat, president of the Surat Jewelry Manufacturers Association, said businesses will have to diversify if they want to stay afloat. The most natural choice would be to focus on polishing and cutting cheaper lab-grown diamonds, he said, which importers probably would still be able to afford with the tariffs in place.
But Avi Krawitz, who analyses the global diamond trade, said margins are already thin, due in part to the increased price of Russian diamonds under sanctions, and the next round of tariffs could tip Surat over the edge. “It’s a big acceleration,” Krawitz said, which could force the “downsizing of the industry.”
Most American retailers and wholesalers have built up a three-month supply of gems to absorb the initial blow, according to Paul Zimnisky, an independent diamond consultant. But if the Trump administration goes ahead with the 50 percent tariff, he predicted it will send “shock waves” throughout the supply chain.
Everyone is in “wait-and-see mode,” Zimnisky added. “It’s difficult to conduct business given the current level of uncertainty.”
In Surat, many businesses depend on the diamond trade, and few have been spared from the slowdown.
Munna Parmar, who sells tobacco from atop his motorcycle on Kohinoor Road, said his daily take-home pay has recently dropped from about $17 to $8. “I can’t survive,” he said.
Just behind him stands Jay Patel, whose small shop specializes in dhokla, a popular vegetarian dish. As lunch crowds have thinned since late July, he said his income has been halved.
“If the diamond industry suffers, we all suffer,” he said.
– – –
Political backlash
There’s no certainty that trade negotiators will come to Surat’s rescue.
Trump announced suddenly this month that he would raise tariffs on Indian exports to 50 percent, which he described as a punishment for the country’s purchases of Russian oil, casting a deep chill over U.S.-India relations.
Trade talks between the countries were canceled, and the war of words has intensified. India was “cozying up to both Russia and China,” White House trade adviser Peter Navarro wrote in the Financial Times last week. “If India wants to be treated as a strategic partner of the U.S., it needs to start acting like one,” he continued.
The Modi government has responded by signaling it will strengthen relations with the BRICS bloc, which includes Russia and China, as well as Brazil. Modi has said he is prepared to “pay a heavy price” to protect India’s economy from an unfair trade deal with the United States.
No one on either side seems to talking about tariff exemptions for India’s diamond industry, said Ajay Srivastava, founder of the Global Trade Research Initiative. He said business leaders are hoping that increased domestic consumption can help make up for reduced U.S. demand.
But “there’s no one on the scale of America,” Krawitz said, which accounts for roughly 50 percent of global diamond jewelry demand.
The economic fallout could spell trouble for Modi in Gujarat, where he first rose to political prominence – and where his Bharatiya Janata Party remains the dominant force.
Bhavesh Bhakhar, 49, has worked as a diamond sorter since he was 13, using his trained eye to assess the quality of gems from around the world. He lost his job on Aug. 7. He’s unsure how to provide food for his family and is unable to make payments on an outstanding loan. “The moment I wake up in the morning, I keep thinking about finding work,” he said. “I have gone around pleading to everyone to give me a job.”