Diamond industry in crisis as Trump tariffs rock market

Diamond traders are warning that the $82bn industry has “ground to a halt” because of Donald Trump’s tariffs and the global trade war, with shipments through the gem-trading hub of Antwerp down to about one-seventh of usual levels.

Trump’s sweeping tariffs include a 10 per cent levy on diamond imports as well as proposed variable “retaliatory” duties by country of origin, even though many other minerals such as gold and copper are excluded from the measures. 

The US is the world’s largest diamond consumer, accounting for about half of global demand, but it has to import all of them as it has no domestic diamond mines.

Although the White House has “paused” the so-called retaliatory tariffs for 90 days, the baseline 10 per cent tariff is already in effect and remains in place. The uncertain outlook has had a chilling effect on gemstone traders, as well as on India’s vast polishing industry.

Diamond shipments out of Antwerp, one of the world’s busiest centres for the stones alongside Dubai, came to a “standstill” after Trump announced the new global tariffs this month, according to Karen Rentmeesters, chief executive of the Antwerp Diamond Centre.

She said it made “no sense” for diamonds to be included in US tariffs, and compared the turmoil in the highly globalised industry to that caused by the coronavirus pandemic.

Rentmeesters estimated that daily shipments were just a seventh of normal levels. “It’s disrupting the industry,” she said. “Everything literally ground to a halt.”

The diamond industry is already reeling from several difficult years in which the pandemic and competition from lab-grown diamonds have reduced consumer demand. 

“The diamond industry is not in a good place,” said Richard Chetwode, an industry veteran and chair of mining company Trustco Resources.

“If you are suddenly putting tariffs on it, you are crucifying it,” he added, saying the levies on diamonds would not bring manufacturing to the US.

A typical diamond is flown around the world many times before it ends up in a customer’s hand — between producer countries such as Botswana, trading hubs including Dubai and polishing centres in India.

The only part of the supply chain that is in the US is the certification process. The world’s largest certifying agency, the Gemological Institute of America, is based in California and employs 3,200 people.

The normal process of flying diamonds in and out of the US for certification is now under threat.

Pritesh Patel, chief operating officer at the GIA, said it was bolstering its services overseas across its eight international offices because of the tariffs.

“We are extending services specifically in Dubai and Hong Kong to accommodate some of the impact,” said Patel. “The tariff brings a lot of uncertainty to this entire supply chain end-to-end.”

He added that the GIA was studying whether diamonds brought into the US purely for certification could get an exemption from tariffs through a temporary import bond or a free-trade zone.

The global trade war is likely to hit overall diamond demand, which was barely starting to emerge from several difficult years, as well as creating big dislocations in the supply chain, according to analysts.

India, whose vast polishing industry processes more than 90 per cent of the world’s diamonds, could be particularly impacted.

Because finished diamonds are considered to “originate” in the country where they were polished, India’s multibillion-dollar diamond export industry will be hit by the 27 per tariff proposed by the US on Indian goods, unless the two countries reach a deal to avoid tariffs.

For global diamond demand, “uncertainty is problematic”, said Paul Zimnisky, an independent diamond analyst. “When people are uncertain, they are hesitant to buy, hesitant to invest. I think there will be some impact on consumer discretionary items like luxury, like diamonds.”

De Beers owner Anglo American has written down the diamond-producing giant’s value by $4.5bn over the past two years because of poor market conditions. Anglo is preparing to spin out De Beers in an initial public offering later this year.

New York-listed Signet Jewelers, the world’s largest retailer of diamond jewellery, has also been grappling with the tariffs.

The company informed its suppliers on April 4 that it would not pay for any new tariff impacts “at all” on existing purchase orders, meaning it will require its overseas suppliers to pay the duties.

In a letter seen by the FT, Signet also urged its suppliers to ship existing orders into the US as soon as possible, “with a focus on April and May”.