Diamond market contraction to worsen under Trump

Lewanika Timothy | Wednesday May 7, 2025 06:00

Economic researchers at local economic consultancy firm, Econsult, conclude that diamond market prices are set to rise under the Trump administration mainly driven by proposed reciprocatory tariff plans. Currently, Botswana’s diamond exports to the US face a 10% tariff, whether direct or indirect up from zero. From July, unless the proposed tariff regime changes, they will face tariffs of 37% if direct from Botswana or 26% if indirect via India. “The impact will be to raise diamond prices, which will reduce demand, and/or reduce profit margins in the industry,” researchers noted.

“The impact on demand is particularly worrying, especially given the weakness of the diamond market in recent years, and the hopes for recovery in 2025.” “Finally, the tariff differential between Botswana and India will make it unviable to cut and polish diamonds in Botswana where margins are already wafer thin –and instead it is likely that US-bound diamonds will be cut and polished in India.” The rough diamond pipeline which cradles from mines in Jwaneng and Orapa, leads to centres in India, Dubai and Antwerp before heading to the United States which accounts for about 54% of annual processed diamond demand. Trump’s tariff threat hovers above each of these centers, in turn throwing the carefully and optimistically calculated growth forecasts by the Finance Ministry into disarray. “Botswana’s external outlook remains uncertain, as it is closely linked to fluctuations in the diamond market,” the World Bank said in its Africa Pulse update.

For the diamond industry, which is a luxury business based on creative storytelling and sensitive consumer sentiment, uncertainty is an even greater risk. Even if producers such as Botswana and manufacturers such as India, escape the harshest of the tariffs, it is unclear what impact these measures will have on the US consumer. The US accounts for about 54% of the diamond jewellery industry’s demand and all indicators are that consumer sentiment is cooling in the US, with fears of a bumpy road in that economy going forward, including the possibility of higher inflation and a general slowdown. Researchers predict that in the short term, uncertainty over tariff levels and their impact has led diamond traders and manufacturers to hold back on purchases, which will delay the unwinding of excess inventory levels that have been carried over from 2024. “Overall, the impact on the diamond sector will be negative at all levels – mining, trading and cutting & polishing – even if the magnitude is difficult to forecast at this stage, and will weigh on economic recovery in Botswana,” researchers noted.