As India grapples with the negative impact of US President Donald Trump's tariffs on its businesses and the economy, Gujarat has started to feel the heat. Several key sectors of Gujarat's economy, such as textiles, diamonds, ceramics, food, and several others that are particularly reliant on exports to the US, are facing the consequences of Trump tariffs.
The impact of the tariffs is predominantly focused on labour-intensive and high-value sectors, which serve as the foundation for merchandise exports to the United States. These tariffs can have a significant impact on employment creation and directly impact the livelihoods of millions of workers and farmers. While some sectors like pharmaceuticals have been exempted, the overall situation creates uncertainty and pressure on Gujarat's industries and on the livelihoods of many.
Why The Uncertainty
According to the GTRI (The Global Trade Research Initiative) figures, labour-centric sectors contributed over $14.3 billion to India's exports to the US in FY25, including garments ($5.33 billion), textiles and carpets ($2.38 billion), made-ups and worn clothing ($2.95 billion), leather ($795 million), footwear ($461 million), ceramics and stoneware ($1.55 billion), and wood and paper articles ($823 million).
These sectors are predominantly run by SMEs (small and medium enterprises) and are major employment creators in states such as Gujarat, Uttar Pradesh, Tamil Nadu and West Bengal.
Diamond Industry
Surat's diamond cutting and polishing industry is a major global centre employing lakhs of workers. The US market accounts for over 30% of Gujarat's diamond exports. According to the Federation of Indian Exports' Organisation, diamond exports fell from $6.37 bn in 2023-24 to $5.41 bn in 2024-25, which accounts for a decrease of 15%.
More than 1 lakh workers engaged in the diamond cutting and polishing trade across Saurashtra have lost their jobs since April this year, says Gujarat's Diamond Workers Union. Job loss accelerated when the tariffs went up first from 10% to 25% and then doubled to 50%. These workers were paid a measly Rs 15,000-20,000 per month.
Some of the laid-off workers managed to find jobs in the lab-grown diamond (LGD) units, but the outlook on employment remains bleak as that segment too could be impacted by tariffs. Lab-grown diamond exports have also fallen 25%.
Mayurbhai Dakhara, owner of D&D Diamonds in Surat, employs 150 workers in his diamond-cutting factory. He is still optimistic about not only sustaining but also growing his business. He exports diamond jewellery to 15 countries, including the US and China. "We make the cheapest and most specialised diamond cuts and jewellery in the world. Nobody can match our price," said Mayurbhai. He has passed on the raised tariffs to his customers. "The customers in the US will get used to the new raised price. The market will stabilise soon. It is because of their leader," Mayurbhai states, adding that the government should make an incentive plan for lab-grown diamonds as they have huge potential, both domestically and internationally.
The Textile Industry
The US tariff blow is predominantly severe for Gujarat's textile industry, centred around Ahmedabad for cloth mills and Surat for synthetic fabric exports. The US happens to be the main customer of Indian textiles. India's total textile exports to the US are around $10-12 billion annually, with Gujarat making up more than 15% of that trade. Losing the US market could have cascading effects across supply chains - from yarn makers to embroidery units.
Exporters were optimistic about the US rolling back the initial 25% tariff. But now, with an additional 25% tariff, they deem the US market out of bounds.
Though the textile industry has expanded its exports to other regions like Europe, West Asia, and Latin America, substituting the loss from the US market is going to be tough. The tariffs threaten to make Indian textiles uncompetitive against rivals like Bangladesh and Vietnam. Orders have been placed on hold, and the industry fears substantial revenue losses and potential job cuts if the situation isn't resolved.
The Ceramic Industry
Morbi in Gujarat has emerged as the ceramic hub of India. As per industry reports, ceramic and quartz exports to the US are around ₹2,500-3,000 crore from India. Presently, the increased tariff of 25% has been passed on to the buyers. But this won't be sustainable once competitors, mostly from Europe, start selling at cheaper rates.
Other manufacturing sectors like food processing and chemicals (especially specialty chemicals) are also bracing for impact. Gujarat also exports food essentials like flour, rice, and oil, frozen food and snacks. These specialty items will see a big decline in demand. Gujarat also exports frozen food items and spices to the US. Of course, there won't be any competition from other countries in this sector, but the purchasing cost for Indians living in the US will increase. This, in turn, could impact the demand.
Similarly, specialty chemicals exporters, with their long product qualification cycles and high switching costs, face difficulties in quickly replacing lost US business.
America is a key export destination for Indian pharmaceutical companies. Its total pharma exports to the US stand at $10 bn. Of this, Gujarat's shipments are worth $2.83 bn. Currently, Trump has spared the pharmaceutical industry, but he has warned of up to 250% tariffs on pharma imports globally to promote 'Made in USA' manufacturing.
The Government's Response
India is examining the impact of the tariffs and affirming its commitment to safeguarding national interests. The industry is urging the government to expedite trade talks with the US to remove the tariff disparity. Industry bodies have also requested the Centre to provide support like export incentives, interest subsidies, and faster GST refunds.
A consumption push from the proposed GST cuts, as mentioned by the Prime Minister in his Independence Day address, could also help.
On August 18, the finance ministry notified the abolition of 11% duty on cotton imports with immediate effect amid widespread fears of job losses in the textile sector due to the US tariffs.
In Gujarat, mid-sized exporters have shifted focus to low-margin domestic orders to survive.
Exporters are hopeful of logical and rational negotiations with the US to find a mutually agreed resolution. Another lesson is diversifying export markets to minimise reliance on the US and build long-term economic durability.
India and the US had begun talks for a just, balanced, and mutually beneficial Bilateral Trade Agreement (BTA) in March this year, with an objective to complete the first stage of the Agreement by October-November 2025. However, that, too, seems to be stalled now. The time is ripe to introduce reforms across sectors in India. The 1991 liberalisation showed us the true value of reforms. On a brighter note, US tariffs have given India the opportunity to once again usher in genuine, and not populist, reforms.
(The author is Contributing Editor, NDTV)
Disclaimer: These are the personal opinions of the author
