Debswana executives have a phrase they often apply to situations similar to the one the industry is facing from the recent announcement of global tariffs by the United States: VUCA.
Volatile, Uncertain, Complex and Ambiguous or VUCA perfectly describes the storm of confusion that has been unleashed by the US tariffs that were set to kick in on Wednesday. President Donald Trump’s decision on Thursday to pause the tariffs for 90-days, and increase the rates on China beyond 100%, introduce even more instability for the diamond world. For businesses, uncertainty is the archenemy of growth as it introduces risks that cannot be priced into operating costs, revenue projections, or even basic business continuity. A clear example of this is Lesotho where the planned 50% tariff would have killed off that country’s key textile sector, a major employer in the mountain kingdom.
Under the original tariff plan, Botswana would have faced tariffs of 37% on direct exports to the US, whilst India, which processes about 90% of global rough diamonds, was due for 26%. China, a smaller diamond processing centre when compared to India, is facing tariffs of 125% as part of a tit-for-tat war with the US.
For businesses, the imposition and subsequent pause in the tariffs, confirms the idea that the US, the world’s single richest market, still has its eye on raising duties, a risk that affects key decisions such as investment, credit uptake, employment and many others. 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.
Official comment from the diamond industry has thus far been limited, given the fluid nature of the developments around tariffs. De Beers, which is Botswana’s 50/50 partner in diamonds, was restrained in its initial comments to Mmegi last week.
“Regarding your questions on tariffs, following yesterday’s announcement, we are in the process of assessing the potential impacts of tariffs and will engage with our partners and stakeholders to consider the most appropriate way forward,” a De Beers spokesperson, David Johnson, said. At government level, the Ministry of Trade and Entrepreneurship has said it is engaging the US.
“The Government of Botswana wishes to reassure members of the public and the business community that it is engaging with the US government to find amicable resolution to this matter,” said Minister Tiroeaone Ntsima.
“Further updates will be provided as consultations progress and engagement with the US government unfolds.”
For its part, Business Botswana, the private sector’s main lobby group, said it would hold a consultative session to “assess the sectoral implications of these tariffs and put together a position paper of a proper response strategy” for the government to use as it engages the US.
In the diamond world, India’s Gem Jewellery Export Promotion Council (GJEPC), which represents the cutting and polishing industries that make the country the global industry’s midstream, has urged its members not to panic. Whilst Botswana has a growing cutting and polishing sector, it remains a fraction of India’s industry.
“The Trump administration’s announcement of a 26% reciprocal tariff on Indian gem and jewellery exports to the US would be a significant burden on Indian exporters and American consumers alike,” the GJEPC said in a statement.
“Whilst the tariff’s application to competing nations presents both challenges and opportunities, it is likely to significantly impact India’s diamond and jewellery sector—a cornerstone of its exports to the US. In the long term, we foresee a reshaping (of) global supply chains.”
The Council estimated that if the US tariffs are applied, there would be challenges sustaining India’s current export volume of $10 billion to the US market.
“We urge the Government of India to progress the Bilateral Trade Agreement between India and the US, as it would be crucial in navigating the tariff issues and securing long-term interest of the sector,” the GJEPC said.
The Antwerp World Diamond Centre, another important centre for Botswana in the European Union, said for now the region had not imposed reciprocal tariffs on American polished diamonds. “The European Council has decided not to impose import tariffs on polished diamonds originating from the United States, as part of its package of countermeasures in response to the US tariffs imposed by President Trump.
“European import tariffs could have caused significant harm to Belgium’s diamond sector, without meaningfully impacting the US in return,” the Council noted.
Closer to home, other experts are analysing the potential impact of higher US tariffs on diamonds. Speaking prior to the 90-day pause, First National Bank Botswana chief economist, Gomolemo Basele, explained the possible impact.
“Prior to this pronouncement, Botswana’s diamond exports to the US, which also fall on the US’ critical goods list (precious stones), were not subject to any tariffs.
“Given this change, diamond exports to the US will be taxed at 37% thus making them more expensive for the US consumer. “Exports to the US, however, account for a small portion of Botswana’s total exports (1.45 percent on average since 2020) as well as diamond exports (averaging 1.54 percent since 2020). “This points to the possibility that the direct impact of this development could be limited in terms of determining Botswana’s total diamond exports,” he said.
The larger impact will be on how diamonds from Botswana are routed through centres in India, Antwerp and increasingly Dubai, down the value chain pipeline, analysts say.
For an economically critical commodity whose recovery is eagerly awaited to lift national revenues, diamonds are entering yet another period of unwelcome uncertainty.
Between lab-growns, the regularisation of Group of Seven trade and now, the possibility of US tariffs, the diamond industry is undergoing a severe VUCA episode.
