How Circularity Can Be a Strategic Response to Tariffs

Globalization is fracturing. Tariffs, trade wars, resource nationalism, and supply chain shocks are no longer rare disruptions—they’re the new normal. The past few weeks alone have seen swings in U.S. tariffs and China’s shifting stance on rare earth minerals, underscoring a broader trend: global commerce is increasingly volatile, redrawn by geopolitics, climate, and conflict. Trade fracturing goes beyond tariffs, however. Governments are increasingly imposing policies to favor domestic sourcing, to restrict access to critical materials, and to steer trade towards geopolitical allies—all of which companies need to navigate. From Europe’s carbon-linked import levies to Indonesia’s nickel ore export ban, even recycling laws—over 30 related to critical minerals enacted globally since 2022—look beyond environmental outcomes to advance industrial and political goals. Extended Producer Responsibility (EPR) schemes, for instance, reward companies that keep value creation within national or regional borders. Traditional responses—like dual sourcing and near-shoring—still matter. But an underused lever is the circular economy: reusing, repairing, remanufacturing, and recycling to reduce dependence on volatile global supply chains. Often dismissed as a sustainability play, circularity—done well—is a strategic hedge. It cuts material imports, opens new revenue streams, and builds customer loyalty. And it’s a strategy that many firms have quietly embraced to survive and thrive. Take British Sugar, the UK’s largest sugar producer. By turning byproducts from sugar production into revenue streams—from animal feed to soil conditioners—the company reduced waste and boosted margins. This shift did not begin as a sustainability goal, but rather a strategic response to changing market dynamics and price volatility. That kind of systems thinking—designing for autonomy, flexibility, and resource efficiency—is now critical for building a durable competitive advantage. Here are four circular strategies to build resilience. Secure Resources Locally Trade barriers and concentrated supply chains make it harder and costlier to access critical inputs. For example, rare earth elements and other strategic minerals foundational to the modern economy are increasingly subject to strategic controls including by the U.S., China, the European Union, and Japan. Circularity helps mitigate this exposure. Urban mining—recovering materials from waste streams—helps companies reduce reliance on volatile import streams, turning waste into tomorrow’s resources. Electronic waste alone contains $91 billion in metals. With the right innovations, such closed-loop strategies complement domestic production, while also cutting greenhouse gas emissions by 80%. Companies like Umicore, Rolls-Royce and Cyclic Materials are already capitalizing on extracting critical materials from end-of-life items. Circularity also strengthens the resilience of the clean energy transition. While renewables boosts energy security by reducing reliance on fossil fuel imports, scaling renewable energy also increases exposure of countries to mineral import risks. Solar panel circularity alone could unlock an $80 billion market, helping to secure benefits of decarbonization without trading one dependency for another. Unlock Cost-Competitive Secondary Markets When tariffs drive up costs of imports, companies typically must either pass costs to customers or absorb a margin hit. Circularity offers a third path: the resale of repaired, refurbished, or remanufactured goods. If reprocessing is done locally or in trade-aligned regions, secondary offerings can sidestep tariffs while undercutting new imports on price. Shares of secondhand retailers jumped following the recent U.S. tariff announcement, reflecting anticipation of growing consumer demand. Beyond a pricing advantage, secondary market offerings also extend asset lifecycles and capture value that would otherwise be lost. Companies like IKEA see circular material flows, combined with regional supply chains, as ways to build resilience and cost efficiency ways, if done at scale. Diversify Revenue Through Services Businesses reliant on one-time sales of imported products are vulnerable when trade disruptions delay shipments or inflate costs. Circular service models—subscription, product-as-a-service, or performance-based contracts—shift the focus from selling new units to maximizing revenue from existing assets. Take Swapfiets, which provides bicycles through a monthly subscription, inclusive of repair and maintenance. By designing their bicycles for durability, repairability, and use of recycled materials—core principles of circular design—Swapfiets’ bicycles last longer and can be reused across multiple customers, generating more recurring revenue from the same assets. Separately, in electronics, product-as-a-service models could unlock $566 billion in savings globally, while cutting emissions by nearly 15%. Deepen Customer and Supplier Relationships Circularity naturally fosters stronger partnerships. Product-as-a-service and take-back programs transform one-off sales into longer-term engagements and predictable revenue, generate valuable usage data, and incentivize better product design. In uncertain times, deepening trust and loyalty with customers and suppliers can become an advantage. Consider John Deere. The company leases farm equipment embedded with IoT technology that tracks real-time field performance. This data helps refine product designs, reduce material use with modular components, and secures multi-year service relationships with customers. Success required tighter collaboration with suppliers to enable circular design and manage reverse logistics, fostering more integrated, resilient partnerships. . . . If circularity is so advantageous, particularly amidst the rising tide of geopolitical forces, why is adoption limited? Internally, many companies still face misaligned incentives—P&Ls reward unit sales over lifecycle value, while reverse logistics systems remain underdeveloped. Executives may hesitate to back long-payback investments without immediate business cases. Externally, regulatory complexity and classification challenges add friction. Leading firms are breaking through by linking circularity to strategic objectives, build accountability through circular KPIs (like revenue from circular offerings), and prioritize piloting and learning before scaling. Crucially, they treat circularity not as a checklist—but as a transformation.

How Circularity Can Be a Strategic Response to Tariffs

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