CirCon#7 - The Impact of Trump’s Tariffs on the Circular Economy

We recently asked circularity professionals for their views on the impact of Trump’s Tariffs on the circular economy, and received captivating and, at times, conflicting inputs. We’re delighted to summarise and share them with you today in this special edition newsletter!

Disclaimer - tariff regulations are changing daily, so for maximum impact, let’s imagine we’re now living in a world where the highest tariffs have been implemented and we’re deep in the throes of adaptation…

Positive Impacts:

Increased demand for used, refurbished, and remanufactured products. Tariffs on new goods will drive consumers towards more affordable alternatives, reducing reliance on virgin materials and requiring that we prioritise products with extensive or extendable lifecycles.

Stimulation of domestic and localised circular supply chains. Tariffs incentivise the development of localised recycling, remanufacturing, repair, and transportation infrastructure, reducing reliance on global supply chains. This addresses the "lazy habits" of exporting used goods in bulk for ease.

Enhanced residual value and extended lifecycles. Higher costs for new goods prompt consumers to use products longer and preserve their value. OEM's will be forced to innovate to meet shifting consumer habits by manufacturing more durable, modular, or desirable products.

More robust reverse logistics. The increased cost of imported goods necessitates robust reverse logistics processes, such as the efficient recovery and harvesting of components from end of life products. This increases the volume of viable remanufacturing and reduces reliance on virgin materials.

Negative Impacts:

Economic uncertainty and inflation. The uncertainty surrounding tariffs will lead to inflationary pressures as companies attempt to adjust their pricing and supply chain strategies without knowing what tomorrow will bring. Global trade models become less reliable, creating volatility in markets, impacting confidence, and hindering longer-term circular economy investments.

Disruption of global supply chains. Circular supply chains rely on the movement of secondary materials across borders. Tariffs stifle these flows, making it harder to access essential components or spare parts and slowing the development of scalable remanufacturing or repair solutions.

Global tax strategies and profit shifting. Tariffs influence corporate tax behaviour, as companies seek to minimise financial burdens by shifting profits across jurisdictions. This distorts global trade patterns and reduces tax revenue, while shrinking corporate margins and increasing economic fragility. Investments in circular initiatives will be delayed or cancelled.

Increased smuggling and black markets. High tariffs increase the likelihood of smuggling, leading to illicit trade and undermining legitimate circular economy initiatives. Historical parallels like the Boston Tea Party tea tax show that when regulation gets too tight, black markets emerge.

Conclusion:

Trump’s tariffs present opportunities, but also complex and multifaceted challenges for the circular economy. While they incentivise localisation, increase demand for secondary materials, and encourage innovation in operational reverse logistics processes, they also increase illicit smuggling, economic uncertainty, and significant disruptions to global supply chains.

Not to ask for too much, but we hope balance is found, the world takes heed of the advantages of localisation and reverse logistics optimisation, and all the negatives become hypothetical!

Do you have additional thoughts on this topic? Respond to this email and let us know!   

From Circular Connect:

A quick note to thank everyone who shared their views. The diversity of thought across the circular economy is amazing, but there simply isn’t enough collaboration or interconnectivity to surface it. That’s why we founded Circular Connect; to bring everything together and connect the circular economy!

Cheers to circularity,

#TeamCircularConnect