The global diamond market has been undergoing a significant shift since 2023, with prices falling and demand steadily declining into 2025. This structural change is driven by a convergence of multiple economic, technological, and socio-political factors. Below is a detailed breakdown of the key drivers behind the current downturn, grouped into three main categories: tariffs, lab-grown diamonds (LGD), and broader economic and cultural shifts.
1. Tariffs and Protectionist Trade Policies
In 2025, the U.S. implemented sweeping tariffs—10% base plus additional reciprocal tariffs targeting countries like India and China. These nations play a central role in the global diamond value chain, particularly India, which handles over 90% of the world's diamond polishing.
- Indian exports declined sharply; many polishing factories shut down.
- U.S. retailers stockpiled diamonds before the tariff hike, leading to temporary price distortion.
- Consumers faced higher retail prices, leading to reduced demand.
As a result, the U.S.—the largest consumer of diamonds—cut back on imports, increasing global oversupply. Antwerp's trade volume fell by 85%, and India's Surat region experienced widespread layoffs and factory closures.
2. The Rise of Lab-Grown Diamonds (LGDs)
Lab-grown diamonds are rapidly gaining popularity due to their affordability, ethical sourcing, and environmental appeal.
- Market Growth: Expected to grow from $8 billion in 2023 to $49.9 billion by 2030.
- Pricing: LGDs are approximately 80% cheaper than natural diamonds.
- Production: India and China dominate mass production, enabling global scalability.
Millennial and Gen Z consumers increasingly favor LGDs for engagement and fashion jewelry. AI-enhanced quality control has elevated consumer trust in LGDs. Even De Beers launched its own LGD brand, Lightbox, to remain competitive.
Natural diamond prices have dropped more than 40% since their 2021 peak, and LGDs are no longer seen as alternatives—they're becoming the new norm for many consumers.
3. Economic Slowdown and Shifting Consumer Behavior
- Global Recession Fears: Post-pandemic consumption has shifted from luxury goods to experiences like travel and dining.
- Falling Marriage Rates: Countries like China saw a drop from 13 million marriages in 2013 to under 6.6 million in 2024.
- Investment Alternatives: Consumers prefer gold or designer handbags over diamonds due to higher resale value and perceived stability.
Inflation, interest rate hikes, and wage stagnation have all contributed to lower consumer confidence and spending on luxury items.
4. Oversupply and Industry Fragmentation
- De Beers' Decline: Market share fell from 90% in the 1980s to below 50% by 2023.
- New Mines: Increased output from Russia, Canada, and Botswana added pressure to global prices.
- China's LGD Surge: Massive LGD exports have further disrupted the pricing landscape.
Even as major players like De Beers cut production, the global inventory glut will take time to normalize.
5. Ethical and Environmental Considerations
- Mining Controversies: Blood diamond issues and environmental destruction have tarnished natural diamonds.
- Transparency Demand: Consumers seek verified origins through blockchain and other traceability tools.
- ESG Priorities: LGDs are marketed as eco-friendly, though concerns remain about carbon-intensive manufacturing in countries like India.
While LGDs appeal to ethical buyers, questions about their true environmental footprint have led to growing calls for production transparency.
6. Geopolitical Risk and Trade Realignment
- Russia Sanctions: G7 restrictions on Russian diamonds (30% of global supply) have disrupted supply chains.
- U.S.-China Trade War: Ongoing tensions and retaliatory tariffs have added market volatility.
- India's Role: As a major processor of Russian rough stones, India faces supply bottlenecks under current sanctions.
Geopolitical instability has spurred nearshoring, blockchain-based certification, and increased reliance on digital retail channels.
Conclusion and Outlook
The 2024–2025 downturn in the diamond industry is not a cyclical dip but a systemic transformation. Tariff regimes, the proliferation of LGDs, evolving consumer values, environmental scrutiny, and geopolitical friction are jointly reshaping the market.
Although natural diamonds may retain niche appeal due to their perceived rarity and luxury status, their dominance is fading. The future likely involves a bifurcated market, where LGDs dominate mass appeal while natural diamonds cater to a shrinking high-end segment.
Industry players are now pivoting towards differentiated branding, leaner supply chains, and digital innovation to weather the storm and prepare for a redefined diamond economy.