Mexico’s 50% Tariff Shocks Surat Diamond Industry, Derails US Rerouting Strategy

Surat | Gujarat — The already-struggling Indian diamond industry—hit hard by shrinking US demand and steep American tariffs—has received yet another blow. In a move that stunned diamantaires and exporters, the Mexican Senate has approved a 50% tariff on a wide range of imports from India and other Asian countries, shutting down what many in the industry saw as the only viable route to bypass soaring US import duties.

For diamantaires in Surat—home to 90% of the world’s diamond polishing—Mexico was not just an option; it was the lifeline. Several major companies had already begun the process of setting up polishing and routing units in Mexico, hoping to take advantage of its strong trade ties with the United States and its previously lower tariff structure.

But now, that door has slammed shut.

“Mexico was the most promising alternative for us. This tariff decision is a major setback at a time when the industry is already reeling under pressure,” said diamond company owner.

Hopes Crushed: Mexico Was Meant to Offset US Tariffs

With the US imposing tariffs of up to 50% on direct imports of Indian gems and jewellery in 2024–25, exports to America plunged dramatically. Indian diamantaires saw Mexico as the perfect workaround—geographically closer to the US than the UAE, with smoother logistics and favourable trade arrangements.

Several Surat-based companies had finalized investments to set up Mexico-based processing centres. “We had nearly completed feasibility assessments. The idea was to polish in Mexico and ship tariff-free to the US. This decision changes everything overnight,” said the owner of a leading diamond firm.

Trade Shifts to UAE, Hong Kong — But Not Enough

Following the US tariff shock, exports to the UAE and Hong Kong surged as traders rerouted shipments to take advantage of lower duties and re-export mechanisms. But the boost was temporary.

According to GJEPC data, exports of cut and polished diamonds dropped nearly 9%, falling from $8.9 billion (Apr–Nov 2024) to $8 billion (Apr–Nov 2025). Overall exports in the first half of FY2026 were lower than the previous year despite aggressive rerouting.

Surat’s MSMEs at Breaking Point

Surat’s diamond sector, built on thousands of small and medium units, is now facing its toughest period in decades. A mix of falling global demand, high financing costs, and tariff barriers on both ends—US and now Mexico—is squeezing margins like never before.

“Running a small polishing unit is becoming unviable. Orders have dropped, margins are shrinking, and now even alternative markets are closing in,” said a small-unit owner from Varachha, Surat.

A Critical Moment for India’s Diamond Capital

With the Mexico option gone and the US market shrinking, diamantaires now fear deeper job cuts and production slowdowns. The industry, which employs nearly 1 million workers, is demanding urgent intervention and new trade strategies.

What was once seen as a temporary disruption is fast turning into a structural crisis for India’s diamond powerhouse.