Soon after assuming office this year, President Trump initiated a significant effort to overhaul global trade, implementing extensive tariffs and, eventually, negotiating trade agreements with countries. It remains uncertain if this endeavor will achieve its stated goal of repatriating manufacturing to the U.S., but preliminary indications suggest that Trump’s trade policies might be having an unexpected side effect: contributing to climate action.
As tariffs lead to increased prices, companies and consumers have adopted practices of waste reduction and reuse—known as “circularity” in sustainability discussions—to cut costs. Businesses are actively seeking simple ways to incorporate recycled materials, particularly for high-value products like critical minerals. Concurrently, more individuals are purchasing pre-owned items, as companies expand their offerings of second-hand goods. For both consumers and businesses, the positive environmental outcomes are welcome byproducts.
“Virtually all our clients are assessing various options to minimize the financial impact of tariffs,” states David Linich, a sustainability principal at consulting firm PwC. “Utilizing materials already available within the region is now a viable option that perhaps hadn’t been considered before.”
However, there are limitations to how quickly circular solutions can be scaled. Most critically, the U.S. lacks the infrastructure for widespread adoption of recycling and reuse. Nevertheless, the effects of tariffs are still in their initial stages. As these costs continue to impact the economy, the frameworks necessary to advance circular solutions are likely to grow.
The foundational concepts behind the circular economy have existed for many decades. Since as early as the 1980s, economists have recognized circularity as vital for achieving sustainable development. Yet, despite consistent academic interest globally, the actual implementation of circular solutions has been inconsistent. Beginning in the early 2000s, governments—especially in Europe and Asia—developed frameworks to promote a circular approach. While businesses have complied and in some cases launched pilot programs, it is evident that widespread adoption in any economy remains elusive.
A major reason for this is the simple fact that in most cases, using new (virgin) materials has remained easier and more affordable. Tariffs—compounded by supply chain pressures and inflation—are now altering this equation. The price for scrap aluminum in the U.S. has risen dramatically in recent months as recycling becomes more cost-effective due to tariffs. Data from The Aluminum Association, an industry trade group, indicated that in September, aluminum scrap inventory had increased nearly 15% from the beginning of the year as a result of the tariffs. Furthermore, companies have looked to domestic sourcing, 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 possess U.S. infrastructure for recycling. As tariffs impact other sectors, we may see new systems established to foster circularity.
Consumers affected by inflation are also contributing to the proliferation of circular solutions. An August survey of consumers in North America and Latin America conducted by Mastercard and shared with me revealed that over a third of respondents are now seeking second-hand products more frequently than they previously had. And 18% of respondents reported increasingly renting products instead of buying them. These shifts in consumer behavior influence business practices as companies strive to meet this demand. Perhaps the clearest example is the clothing market, particularly at the higher end. In recent years, numerous companies have launched rental options and innovative second-hand clothing services.
To understand how tariffs may be influencing consumer behavior, the Mastercard Economics Institute looked at demand for what’s termed circular sports gear—which can range from used goods to rental items. Sports gear is largely imported from China and heavily tariffed, with price increases already passed on to consumers. As of the end of July, circular sports sales had climbed 11% from the beginning of the year, compared to just 3% for sports equipment more broadly. These figures are likely to stimulate even further investment in circular offerings within this sector.
“Retailers selling new sports equipment are realizing that customers are entering stores with an interest in purchasing used items,” says Michelle Meyer, chief economist at the Mastercard Economics Institute. “An awareness has been created that will probably prove to be enduring.”
If that awareness spreads to other highly tariffed sectors, from furniture to heavy machinery, this administration may unintentionally succeed in facilitating widespread adoption of circularity, a goal that has evaded its proponents for decades.
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