One Unexpected Climate Benefit of Trump’s Tariffs

Almost immediately upon taking office this year, President Trump launched a giant push to reset the global trade order with far-reaching tariffs and, eventually, trade deals with countries that negotiated successfully. The jury remains out on whether the effort will succeed at achieving its stated goal of bringing manufacturing back to the U.S., but early evidence suggests that Trump’s trade agenda may be having a surprising unintended consequence: helping climate action.

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As tariffs raise prices, companies and consumers have embraced waste reduction and reuse, practices known in sustainability circles as “circularity,” to cut costs. Businesses are looking for easy places to swap-in recycled materials, particularly for high-value products like critical minerals. More people, meanwhile, are buying used products, as companies increase their number of second-hand offerings. For consumers and companies, the positive climate outcomes are welcome side effects. 

“Every one of our clients that I can think of is evaluating the different options to minimize the cost impact of tariffs,” says David Linich, sustainability principal at consulting firm PwC. “The reuse of materials that are already within the region is one lever that is now on the table that perhaps hasn’t been on the table before.”

There are limits, however, to the ability to quickly scale circular solutions. Most importantly, the U.S. lacks the infrastructure for widespread adoption of recycling and reuse. But it’s still early days for tariffs. As the costs continue to weigh on the economy, the ecosystems needed to advance circular solutions will likely only grow.

The intellectual underpinnings to the circular economy approach have been around for decades. As early as the 1980s, economists have framed circularity as a key to unlocking sustainable development. But despite the consistent academic interest around the globe, actual implementation of circular solutions has been spotty. Beginning in the early 2000s, governments—particularly in Europe and Asia—crafted frameworks to advance a circular approach. While businesses have complied and in some cases launched pilot programs, it almost goes without saying that widespread adoption in any economy remains elusive.    

A big reason for that is the simple reality that in most cases using virgin materials has remained easier and cheaper. Tariffs—added on top of supply chain pressure and inflation—are changing the math. Demand for scrap aluminum in the U.S. has risen dramatically in recent months as recycling becomes more cost-effective in the face of tariffs. Data from The Aluminum Association, an industry trade group, showed that in September aluminum scrap inventory had risen nearly 15% from the beginning of the year as result of the tariffs. And companies have looked to recycle critical minerals, after China, the leading processor of critical minerals, restricted access to its supply in response to Trump’s trade agenda. Aluminum and critical minerals are two sectors that already have U.S. infrastructure for recycling. As tariffs weigh on other sectors, we may see new systems established to foster circularity.

Inflation-inflicted consumers are also playing a role unlocking circular solutions. In an August survey of consumers in North America and Latin America conducted by Mastercard and shared with me, more than a third of respondents said that they are looking for second-hand products more than they had previously. And 18% of respondents said they are increasingly renting products rather than buying them. These patterns of consumer behavior shape business practices as companies look to serve this demand. Perhaps the most obvious example is the clothing market, particularly at the higher end. In recent years, a slew of companies have launched rental options and innovative second-hand clothing services.

To understand how tariffs may be affecting consumer behavior, the Mastercard Economics Institute looked at demand for so-called circular sports gear—which could range from used goods to rental items. Sports gear is both largely imported from China and heavily tariffed. Price increases have already been flowing to consumers. As of the end of July, circular sports sales had increased 11% from the beginning of the year compared to just 3% for sports equipment more broadly. Those numbers will likely stimulate even further investment in circular offerings in the sector.  

“Retailers that are selling new sporting gear realize that customers are walking in wanting to purchase a used item,” says Michelle Meyer, chief economist at the Mastercard Economics Institute. “There’s an awareness that has been created that probably will prove to be sticky.”

If that awareness spreads to other highly tariffed sectors, from furniture to heavy machinery, this administration may unintentionally succeed in unlocking widespread adoption of circularity that has eluded its backers for decades.

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