The U.S. currently has imposed a total of 50% tariffs on imports from India, with 25% of these constituting reciprocal tariffs, and another 25% being imposed as a penalty for India’s imports of Russian oil. File.
| Photo Credit: The Hindu

U.S. President Donald Trump listens as Indian Prime Minister Narendra Modi speaks during a joint press conference at the White House in Washington, D.C., U.S., February 13, 2025.
| Photo Credit: Reuters

The U.S. has imposed high tariffs, notably a 50% duty implemented in August 2025, which significantly impact India’s marine exports. File image used for representation.
| Photo Credit: The Hindu

The U.S. has imposed high tariffs, notably a 50% duty implemented in August 2025, which significantly impact India’s marine exports. File image used for representation.
| Photo Credit: The Hindu

U.S. Secretary of Commerce Howard Lutnick speaks while standing next to U.S. President Donald Trump. File.
| Photo Credit: Reuters

Representational file image.
| Photo Credit: Reuters

What are your thoughts from Prime Minister Narendra Modi’s recent visit to China to attend the SCO summit? Can we say India and China are now settling into a “new normal” despite persisting differences?

I think we are still quite far from reaching a new normal in our relations with China. Yes, it is true that both sides have signalled an intention to move forward. We have certainly taken some initial steps, which are important but probably more symbolic than substantive, to bring about a thaw like resuming airlinks, Kailash-Manasarovar yatra, liberalising the visa regime, etc. However, we still need to address larger issues like trade imbalance, market access to Indian goods and services, de-escalation and early harvest issues on the border, construction of their largest dam on their side of the Brahmaputra near the Indian border, etc.

Moreover, the Chinese have become active again in our neighbourhood. For example, their critical support to Pakistan during Operation Sindoor and their attempt to encircle India through our neighbours either physically or through groupings are all manifestations of this. In addition, we now have to deal with China both a neighbour as well as the No.2 power. For the first time, we have a superpower sharing a border with us. All this is changing the complexion of our relationship with China. The old template is not enough to deal with China in both these avatars. So, lot more needs to be done to restore trust before we can reach a new normal in our relations. As of now, our relations with China are highly securitised, which constrains progress to this new normal.

Some argue that global disruptions since Donald Trump came to power have nudged India and China closer. Do you see U.S. tariffs and trade policies shaping India’s approach to China, or it is part of a policy taken independent of U.S. pressure tactics?

While it is true that President Trump has disrupted the trajectory of India-U.S. relations, I doubt that the U.S. tariffs nudged us closer to China in any substantive way, since it was becoming clear to both India and China that the four-year stand-off at the border was becoming counterproductive for both. Consequently, we have stepped back a bit in October 2024 and worked on the first tranche of some symbolic steps. However, what we have done in Tianjin is to show the U.S. that we have options, we can manage our differences with China and should not be taken for granted. But how serious these options are is debatable given the more systemic problems we are currently facing with China as I mentioned earlier. That said, while countering China where necessary, we should also find common cause where possible. Neither country is doing enough to find synergy in regional, plurilateral or global issues.

Watch | ‘Old templates won’t work with China’: T.S. Tirumurti on India-China ties

That takes us to the U.S.-India ties, which now face turbulence — 50% tariffs, frictions on trade and repeated public criticisms from U.S, etc. How do you read these developments?

The U.S. has to decide first where they see India fit into their scheme of things. Secondly, they will have to make sure that our relations are not episodic by which I mean that every episode cannot subject our relations to trial by fire. You will also notice that the countries which have capitulated to the U.S. tariff threats and agreed to one-sided deals are the closest allies of the U.S. like the European Union, Japan, South Korea, etc. They paid that price not for the trade deal but for keeping their alliance alive. Without it, they are rudderless in the so-called liberal world order. The challenge to that order is real since, for the first time, it is coming from within – from the U.S. However, when the U.S. tried the same tactics with non-allies like India, it is not working out well. That’s because we are keen to preserve our relations with the U.S., but not at any cost.

Further, naming and shaming doesn’t work well with our leadership, as we saw when Prime Minister Indira Gandhi walked out on President Nixon. The way the U.S. cosied up to Pakistan after Operation Sindoor has muddied the waters even more. Levying punitive tariffs for buying Russian oil has brought in a completely extraneous geopolitical element into the trade issue. The U.S. is also asking the EU and G7 to levy 100% tariffs on India and China. We are also waiting to see how the U.S.-China deal impacts the Indo-Pacific and, of course, our geopolitical interests. This will in turn impact QUAD and so on. I am convinced both countries see value in our partnership and that’s why the trade negotiations are resuming. With the U.S. asking NATO countries to stop buying Russian oil, maybe the Damocles sword over us on punitive tariffs will finally lift.

The tensions in Indo-U.S. relations also bring India’s ties with Russia under the spotlight. With no end in sight for the Ukraine war, Indian position comes under great criticism from the U.S. How do you assess India’s Ukraine policy?

I am convinced that we took the right decision in 2022 to abstain on the U.N. Security Council resolutions on Ukraine and call for a return to diplomacy where the legitimate interests of all parties are addressed. But what I have been consistently arguing for, including in my writings, is that India should play a more active role on the Ukraine front, at the very least as a tactical move to deflect criticism.

This does not mean mediation but to remain actively engaged, especially when we knew that the West has been upset with us. I had pointed out to the active role India played in the Korean war in U.N. Security Council between 1951 and 1952, in recognition of which we were made Chair of Neutral Nations Repatriation Committee after the armistice. Operation Sindoor shows us that if we seek greater engagement of our partners with our conflicts and issues, we need to engage more with their conflicts and issues, especially when geopolitics is determining economic and technological outcomes. When I see the current parleys between India and the EU, France, Russia, the U.S., etc, I only wish we had done this earlier.

West Asia is another flashpoint. India, unlike most other Global South members, has avoided strong criticism of Israel over Gaza, but joined SCO and BRICS members in condemning Israel’s attacks in Iran. What explains these positions?

I am not sure whether Global South has really been vocal or impactful on the Gaza war. Gulf countries like Saudi Arabia and the UAE have remained on the sidelines of Gaza war. Their larger interest was to remove the threat of Iran and its proxies from the region, which Israel largely accomplished. The Gulf countries also want to normalise relations with Israel after signing of the Abraham accords with U.S. help. You have seen how they rolled the red carpet out for President Trump without exerting pressure on him to stop the Gaza war. India saw all this as a vindication of its pro-Israeli tilt given our close bilateral relations with Israel. However, with the devastation happening in Gaza and the rapid deterioration in the West Bank, our position is becoming untenable. While we may not want to get ahead of Gulf and the Arab world on the Palestine issue, we have big interests in that region though our interests may not necessarily coincide with theirs. Let us hope that our recent more balanced articulation translates into a more active engagement by India in West Asia.

Critics say India’s policy of “strategic autonomy” is under strain amid U.S.–China rivalry and the Ukraine war. Do you believe strategic autonomy still works for India, or does it require redefinition?

Strategic autonomy has worked for India so far from the time of PM Nehru’s non-alignment, where we refused to join either of the two Cold War blocs – led by the U.S. and the Soviet Union, right till today’s multi-alignment, where we engage with both the big powers – the U.S. and China. It has given us the space for independent decision-making. Just imagine if we had been an “ally” of the U.S. or China now, we would have been struggling in their clasp. Further, strategic autonomy for a big power like us is the path to emerge as a potential pole in an emerging multipolar world. It is also about leadership – showing the world that there is another path other than joining one of the two camps, just as our non-aligned stand did for the developing world then.

How do you look at the shifts in the global order? What guiding principles should shape India’s foreign policy in such uncertain times?

There are certainly serious disruptions to the global order. On the one hand, forces are tearing each other apart in conflicts and violating international law with impunity. On the other hand, global challenges like climate change, energy security, pandemics, AI and digital issues, cyber threats, etc. are forcing the same countries to cooperate and work together. That’s the irony. At which point these two forces meet will determine the trajectory of the global order. Also, let us not get too nostalgic about a world order which we neither shaped nor did it really help us even if we learnt to use it to our advantage despite all odds. An example is our rise as a nuclear power, where every conceivable hurdle was put in front of us at every point, including sanctions, and we still managed to overcome all that and emerge as a nuclear power.

We were never for status quo and always called for meaningful reform whether in UN Security Council or other 1945 architecture linked institutions like World Bank, IMF or WTO. Looking ahead, I can only say that as a rising power, we need to be proactive. We have been second to none to contribute to the global commons like vaccine maitri during COVID-19 or to combat climate change, etc. However, the world expects us to play a bigger role in conflicts and geopolitics. No more can we just put our head down, mind our own business and expect to become the third largest economy or Viksit Bharat by 2047. That template is broken. We need to get our geopolitics right.

U.S. Secretary of Commerce Howard Lutnick. File.
| Photo Credit: Reuters

There is a palpable tension in the air. “I am worried. Had we even anticipated that heavy tariffs would be imposed overnight, we would have diversified. But what do I do now? I have thousands of karigars (skilled artisans) dependent on me. They have been working with me for decades. They have families to take care of, home loans to pay. What do I tell them? Is it not our responsibility to take care of them?” asks Adil Kotwal, CEO, Creations Gems & Jewellery, a company based in Mumbai that has a North American trading arm, and has been in business for 25 years.

The anxiety about an uncertain future is written on his face. He is sitting at his factory in the Santacruz Electronics Export Processing Zone (SEEPZ) Special Economic Zone (SEZ) in Andheri, Mumbai, in a narrow cabin surrounded by other cubicles with men quietly bent over yellow gold. He says over 70% of the jewellery manufactured in the SEZ caters to the U.S. market.

Kotwal is surrounded by studded gold bracelets, necklaces, rings, all waiting for his approval. But the sheen of the diamonds in the studded jewellery contrasts with the light in his eyes. “For decades, we have built relationships, catered to the U.S. jewellery market, crafting styles they like. You can’t make the same jewellery and sell it in some other country. Here, the supply pipeline is set. But it has been massively disrupted now,” he says.

Until April 2025, plain gold jewellery and studded gold jewellery had a 5%-7% duty. There was no duty on India’s cut and polished (natural) diamonds or lab-grown diamonds. From April 9 to August 7, this year, a 10% tariff was imposed on diamonds, which was increased to 25% on August 8, and was eventually increased to 50% from August 27, 2025. Over 30% of India’s export of cut and polished diamonds is to the U.S. For plain and studded gold jewellery, tariffs have gone to 55% and 57% respectively.

Losses of many kinds

The buildings across SEEPZ’s 110 acres are under a heavy security watch. No one can enter without an elaborate check. Thousands of skilled workers walk in every day to occupy small places in narrow cabins. Armed with a magnifying scope, small weighing scales, and other instruments, they slog in the factory line to create exquisite designs which sell abroad. Thousands of shipments fly out daily from this complex to foreign shores. SEEPZ is strategically located close to the international airport, a little over 3 km away.

“Today, I have jewellery sitting ready in my factory ready to be shipped, not knowing if the client will order it now by paying the higher duties,” Kotwal says. Walmart is the only U.S. importer which has been taking orders by paying the new tariffs, he adds.

The Gem and Jewellery Export Promotion Council (GJEPC), an apex industry body with over 10,000 members, predicts that the total gems and jewellery export to the U.S. from India will decrease by 75%. It is currently at U.S. $1,1180.45 million. Business could go to other countries. After the U.S. imposed 10% tariffs earlier this year, exports plummeted 39%: from US $2,443.642 million in the April–June 2024 to US $1,494.11 million in April–June 2025.

“Countries like Thailand, Vietnam, Dubai, and Turkey might emerge as alternative destinations for the U.S.,” Kotwal says, shrugging his shoulders. He asks angrily if he should now cultivate partners in Thailand or Dubai. “Will my workers move countries? They are all skilled labourers who draw a good salary. What else will they do? Will any other industry absorb them? The government needs to think of them,” he says, hoping for an intervention.

Kirit Bhansali, chairperson of the GJEPC, says the large exporters may be able to absorb the shock for a while, but small and medium enterprises will struggle to stay afloat. Most companies in the sector operate in this segment. Small enterprises are those with an annual turnover of not more than ₹100 crore, while medium-sized companies are those whose annual turnover is not more than ₹500 crore.

Bhansali, who is a partner at Smital Gems, a company in the diamond business, feels one way out is to look for partners in other markets. He says carat-wise 97% of the world’s loose cut and polished diamonds come from India. Most diamond export houses in Mumbai have business networks in Surat, Gujarat, where the gems are processed. The trade is tightly controlled by the men from families of communities traditionally involved in the trade.

The shine in the diamond trade

The mood at Mumbai’s Bharat Diamond Bourse, which is the world’s largest diamond exchange, with 4,000 diamond traders, is flat. Many feel that the U.S. consumer will ultimately have to bear the shock of the price rise.

Dinesh Lakhani has his office in the bourse, which consists of 9 connected towers, across 2 million square feet of Mumbai’s commercial Bandra Kurla Complex. He sits amid little heaps of diamonds of yellow and white. “These are D-grade diamonds,” he says, explaining that D is the highest possible grade for colourless diamonds.

Unlike many others, Lakhani doesn’t feel defeated. “Is this the first time we are faced with a challenge? No. Whether it was the collapse of Lehman Brothers that led to the global crisis in 2008, or COVID (in 2020), we have always emerged stronger. I feel proud of my diamond industry. We work hard and find opportunities in challenges,” he says.

Lakhani is the group director of Kiran Diamonds, the world’s largest exporter of natural diamonds. His company and the network of family-run companies in both Mumbai and Surat employ over 50,000 artisans. Every year, Lakhani exports diamonds worth U.S. $300–400 million to the U.S. This year his orders have dried up.

“Our asset is our skilled labour. That is why we are number one. And we value our asset. We will tap into other markets and try to employ our entire team,” he says.

Part of the reason that Lakhani is so calm is because he knows that the U.S. importers are going to be impacted and that may cause some withdrawal of tariffs. Industry insiders say that Indian loose diamond exporters worked on a modest margin of 4-6%. Those margins rose to double digits and even to 100% for U.S. importers, because they are jewellery makers using loose diamonds to create pieces. “Our loose diamonds form the raw material for American industry. How will they fulfil the demand of their industry?” Lakhani reasons. Also, India has traditionally extended a long credit arm to the U.S., allowing payments to come in even up to 180 days after the export.

He says the “shine” of the bourse comes from trade in loose diamonds across five decades with the U.S. The complex houses customs desks, banks, restaurants, testing labs, and travel agents. Guarded like a fortress, the several gates of the bourse have separate entry-exit points for different people. The bourse itself is surrounded by other high security premises like consulates, residences of high net worth individuals, diplomats, corporate offices, and the Jio World Convention Centre.

Anoop Mehta, the president of Bharat Diamond Bourse and owner of Mohit Diamonds, feels, “If growth in China picks up to pre-COVID times, the Chinese market can absorb Indian diamonds.” He adds that the bourse has exported $10-11 billion cut diamonds this year. “This is down from $20 billion in 2020 because of a number of factors. Of the 4,000 offices, there are now only 1,200 to 1,500 active exporters who operate from here,” Mehta says.

Sabyasachi Ray, the executive director of GJEPC, says there are two ways of looking at the impact: the immediate impact and the long-term impact. “The sudden impact has been massive and trade is finding it difficult to adjust. When disaster strikes, there should be relief. What we want right now is regulatory relief. We don’t want dole. All we ask for is the easing of regulations,” he says. He gives examples of this: the easing of conditions of export on duty-free gold, which once imported needs to be made into jewellery and exported within 90 days after which a duty is stamped on the item. Or the extension of payment realisation from 9 months to 15 months, to give customers some leeway.

The ratna kalakars of Surat

Around 10 lakh people are employed in Surat’s diamond industry, which has been under severe strain since the Russia-Ukraine war started, according to Surat Diamond Workers Union vice-president Bhavesh Tank.

Tank explains that Gujarat’s diamond industry has been struggling for over two years, but the real hit can come around Diwali, when the impact will be felt and significant job losses will surface. “Since the Russia-Ukraine war began, the wages of diamond workers have been cut from the earlier ₹1,200–₹1,500 per day to ₹800–₹1,000. I urge the government to step in to support ratna kalakars (diamond artists) across Gujarat, because 9 out of 10 unpolished and uncut diamonds imported to India are processed here.”

Some industry leaders, however, are asking workers to stay calm. “This is a temporary phase. The U.S. has no viable alternative to India for loose diamonds,” says Jagdish Khunt, president of the Surat Diamond Association. “Yes, tariffs are a setback, but they will eventually push up prices in the U.S., and buyers there will have no option but to absorb the difference, since sourcing from India cannot be avoided.”

In May, the Gujarat government announced a relief package for diamond artisans and small units struggling due to the global slowdown. Nearly 90,000 workers applied for aid under the scheme, which offers ₹13,500 per child, to support affected families. However, by July, only 170 children had received assistance.

During the monsoon session of the Gujarat Assembly, two Congress MLAs raised questions on the special assistance package. In a written reply to Tushar Amarsinh Chaudhary, the State government, run by the Bharatiya Janata Party, said that by July, it had received 70,254 applications from Surat and another 3,926 from Ahmedabad. While applicants in Ahmedabad have received a total of ₹24.03 lakh, workers in Surat are awaiting disbursal. In its reply to Jignesh Mevani, the government disclosed that it had received 13,462 applications from diamond workers in Botad district and another 2,306 from Amreli. However, none of these applicants has been compensated so far. 

vinaya.deshpande@thehindu.co.in

(With inputs from Abhinay Deshpande)

Edited by Sunalini Mathew