For Diamonds, Trump’s Return Could Go Either Way

Since Donald Trump’s reelection as US president on November 5, one respected member of the diamond and jewelry community sent this reporter an animated dancing Trump GIF, while another called him a con man. The politician divides the industry as much as he divides the world. 

But will he be good for the sector? This comes down to a few key questions. Will consumer spending power increase in the Trump presidency? And will this convert to stronger diamond sales? 

The S&P 500 index has risen around 5% since election day, indicating investors believed the new administration’s policies would support the markets. 

Trump, who will take office on January 20, 2025, has pledged to make permanent the provisions of the Tax Cuts and Jobs Act, which reduces taxes for businesses and individuals. It went into effect in 2018 during his previous tenure. Many of its contents expire in 2025.

Spending power to the people? 

With stocks rising and the dollar strengthening, some observers are forecasting a trickle-down effect. 

“I expect the Trump administration to enact pro-business, pro-growth, lower-tax policies that will help build wealth for all consumers,” said Milton Pedraza, CEO of The Luxury Institute, a New York-based research, consulting and training firm for the premium-goods market. “That will help the diamond and jewelry industries.” 

However, the connection between tax cuts and economic success is unclear. It is logical that tax cuts should give consumers more disposable income to spend on goods and services, as well as making public companies more profitable and attractive to investors. Diamond and jewelry demand would be an obvious beneficiary. 

Yet there is no significant correlation between Republicans being in power and stock-market returns, despite the party’s preference for tax cuts, according to data Forbes published in 2021. 

Furthermore, the relationship between stock values and diamond prices appears to be the opposite of what one might expect. The RapNet Diamond Index (RAPI™) for 1-carat polished diamonds fell 53% between January 1, 2013, and November 1, 2024. The S&P 500 index soared 302% during the same period. The divergence has been especially glaring since late 2022. 

Major events and geopolitical developments often have a bigger impact on the US economy and jewelry demand, irrespective of specific economic policies. We saw this with the Covid-19 pandemic and the Russia-Ukraine war. 

American may also choose to save their extra cash, said Dave Marcotte, senior vice president of global research at retail advisory group Kantar Consulting. 

“Based on the last high-wealth tax cut, I’m not seeing any trickle-down [effect] to speak of,” Marcotte noted. “The pattern then was to store the wealth, not invest it. That could change, but it would depend on a tax cut going far deeper [to lower income groups than before].” 

However, “in the short term, it is generally good for jewelers as the potential for upper-income tax cuts” increases. 

Trump has also promised to lower inflation and interest rates, putting more cash into shoppers’ pockets. Whether he can control interest rates comes down to how independently the Federal Reserve — which sets rates — can act. 

The Fed reduced interest rates on November 7 in a move widely anticipated before the election. Fed chair James Powell said the election would have no effect on its interest-rate decisions in the short term. 

“I think the Fed will remain independent but will have to calibrate according to government policies and try to keep inflation and interest rates low, although huge federal deficits are likely to keep interest rates high,” said Pedraza. 

Tariffs and immigration 

Trump’s plans to place tariffs on foreign products could usher in another trade war. The conflict with China, which began in 2018, had mostly indirect impacts on the diamond and jewelry trade: While the tariffs themselves did not have a major effect on the supply chain, they did reduce Chinese wealth and contributed to the weakness in diamond demand that remains visible today. 

However, fresh Trump tariffs could actually slash American consumers’ spending power by $46 million to $78 billion each year, the National Retail Federation (NRF) warned on the eve of the election. 

“I am an optimist, and I think when the administration calculates the inflationary costs of tariffs on consumers, they will focus the effects and temper them,” Pedraza continued. 

Pamela Danziger, a commentator on the US consumer, echoed this sentiment. “Trump ran on a platform to ‘end inflation, and make America affordable again,’” she commented. “So I expect his administration will be hesitant to impose an additional tariff tax on American consumers after the 20% inflation we’ve gone through during the [Joe] Biden administration.” 

There are other conceivable implications of Trump. His tough stance on national borders has reignited the debate about the benefits of immigration for the economy. Signet Jewelers has previously highlighted the importance of Hispanic Americans to its business. The new leadership in the White House could threaten this. 

With possible upsides and downsides, election talk might just be a distraction from the work the industry needs to do to make sales this holiday and market its products over the long run. 

“I think that the US consumer is happy that this election cycle is over, as there is always an anxious feeling, regardless of what side of the aisle you represent,” according to David Bonaparte, president and CEO of trade body Jewelers of America (JA). “The industry will now be able to better focus on business heading into the all-important holiday season.”

Image by David Polak.

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