The World Just Had a Really Wild Week

By Rob Bates | April 11, 2025

I’ve seen good weeks in this industry and I’ve seen bad. But I don’t think I’ve ever seen a week like the one we’ve just had, and I hope I never will again.

After “Liberation Day” froze this industry, and many others, worldwide, we’re left with 10% duties on most imports, about what most analysts expected originally. (Tariffs are way higher on China, and with Canada, it’s complicated.) The specter of sky-high “reciprocal tariffs” got everyone’s attention, but some now see it as a distraction that wasted a week of the world’s time.

Many U.S. administrations have wanted to increase domestic manufacturing. Generally, they woo producers with tax credits, which are a carrot. Tariffs are a stick. The Trump administration is essentially saying: If you want to sell in the world’s largest market and you manufacture elsewhere, you’ll have to pay for the privilege.

The issues with manufacturing in the United States are large and complex, but let’s look at diamond manufacturing. When I first started in the business, there was fierce competition among the main cutting centers, with New York City, Antwerp, and Israel all vying for rough. When GIA tried to open a lab in Antwerp, the diamond industry here rebelled, worried that New York’s status was being threatened if it didn’t have sole access to that lab.

India, on the other hand, began by manufacturing low-cost goods—which some didn’t even consider proper diamonds—for American mass merchants. But it soon took on more and more.

Now India so dominates the industry that it no longer makes sense to talk about “cutting centers,” as there’s really only one. That is largely due to basic economics—India has lower labor costs. The early Indian factories were not exactly pretty, though they did get better. In addition, tech innovations like machines that analyze cut ruined one of the traditional centers’ best advantages: all the whiz kids who could calculate the best way to manufacture rough in their head.

But this isn’t just a labor-cost issue. India’s government made it a priority to support the jewelry and diamond sector. Its banks—many government-connected—handed out cheap credit to diamantaires, making the Indian companies far better capitalized than companies elsewhere (some of whom couldn’t even get financing). And when lab-grown became a thing, the Indian government offered growers incentives and dropped import taxes on raw seeds. Now India dominates that industry as well.

Are those “unfair” trade practices? Possibly. Then again, the United States also offers incentives to local manufacturers. And India isn’t the only place with cheap labor. The diamond industry resettled there in part because it had so many companies run by people with strong business acumen.

Mining countries such as Botswana have tried to dent India’s dominance by demanding a certain amount of goods be cut domestically. Yet despite substantial pressure from both De Beers and the government to set up local factories, manufacturers there say they have not been able to make them economical.

That also happened with cutting in Canada. When the Northwest Territories first started mining diamonds, a slew of factories opened up—so many that one area was nicknamed “diamond row.” They all eventually closed.

It’s possible that advanced machinery could revive manufacturing in Botswana and Canada. Those countries also may get extra value for their stones if they promote their diamonds as locally manufactured. But that’s far from certain.

Which brings us to the U.S. As with Botswana, there’s now a drive to increase local production. It’s been years since Rhode Island was a major jewelry manufacturer. And some think, even with all the new tariffs, it might still not be economical to produce here.

There are things the U.S. government can do to encourage domestic jewelry-making. One is to remove tariffs on raw materials. Designers who want to use gemstones and diamonds in their pieces shouldn’t have to pay extra duties on items that simply aren’t found here. In addition, if the government wants to spur U.S. diamond cutting, it should lift the tariff on rough diamonds. Rough diamonds should be treated like raw gold and raw platinum, which are currently tariff-exempt.

Another is to loosen the rules that let jewelry manufacturers claim their pieces are “made in the USA.” Right now, every part of a piece has to be American-sourced to earn that label—even if it’s made with repurposed gold that was melted here. Those rules weren’t enacted to specifically target the jewelry business, but the industry still has to follow them.

For many in the trade, this last week has been harrowing. When the 90-day pause was announced, the industry breathed a sigh of relief. But jewelry manufacturers—who already work on very tight margins—can’t be happy having to pay a 10% duty on every import, especially with big retailers saying they’ll have to shoulder the burden themselves. I wouldn’t be surprised if we see some manufacturing bankruptcies in the months to come. And if the suppliers don’t eat the extra cost, then prices will go up. This new tariff regime will affect everything from Swiss watches to Japanese pearls to Thai gems. And if you source from China, you should expect to either pay double for every item or find another supplier.

Industry analyst Edahn Golan has noted that jewelry typically does well following times of unrest—whether it’s COVID, the 2008 financial crisis, or 9/11. So all this tumult may augur well for the industry down the road. That said, living through uncertain times is not fun, and despite the possible business benefits, most of us would avoid it if we could.

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