While some of the recently announced tariffs may be temporarily on hold, their looming threat is drawing attention to the need for locally sourced raw materials. As the new US administration tinkers with the right tariff mix, China has already restricted critical mineral exports in retaliation. Some of these minerals may only be available in very specific geographic locations, allowing China and a few other countries to control the supply. These minerals are vital to key industries like solar panels, cell phones, renewable energy tech, and data centers. Cost increases will likely impact the marketplace in one of two ways: consumers will pay higher prices (if they can be passed along), or US manufacturers will be outpriced by tariffs, making them less competitive and threatening their survival.
According to a recent paper published by the Organization of Economic Co-Operation and Development (OECD), demand for raw materials, especially these critical minerals, is projected to double by 2060. A domestic raw materials market focused on reusing waste and production scraps could offset the need for imported virgin materials. Will unmet demand for raw materials in sectors deemed essential to economic security spur the creation of a domestic circular economy?
Some in the US Congress think so. A rare bipartisan bill called The Americas Act is making its way to the Finance Committee. Introduced last year by Senators Bill Cassidy, a Republican from Louisiana, and Michael Bennet, a Democrat from Colorado, the bill proposes investment of $14 billion to create a domestic circular textile economy with financial incentives for manufacturers to relocate supply chains to U.S. soil and a 15% tax cut for developers of facilities involved in the collection, reuse, repair, recycling, renting or processing of textiles.
OECD has also proposed creating new trading agreements that could allow battery material waste from electric vehicles and solar waste to come to the U.S. for recycling. Retailers and manufacturers that suffered from supply chain disruptions during the pandemic are also exploring strategies to support domestic raw material sourcing and circular economy creation. Onshoring of domestic manufacturing may get a boost from two sectors for different reasons. The critical mineral supply is front and center to US industrial policy (and perhaps national security) and exposure of the environmental impacts of “fast fashion” retailers has gained mainstream consumer awareness. What about wood products? According to the National Association of Homebuilders, imports of critical softwood products, mostly from Canada, are approaching 30%. A proposed 25% tariff on Canadian imports could significantly impact the ability to address the housing shortage and even slowdown the recovery from recent wildfires.
In an example of real leadership, IKEA, the world’s largest furniture maker and retailer has embarked on a new journey towards full circularity. They launched their innovative buy back & resell program in 2022 which now operates in most U.S. stores and accepts nearly 3,000 products for resale. With recycling used only as a last resort, resale is prioritized as the company is rethinking every aspect of furniture’s lifecycle, incorporating circular concepts into all aspects of design, manufacture, logistics and supplier practices including renewable energy use and flat-pack shipping.
In industries known for disposability as a business model (like furniture and textiles), mainstream consumers, and not just the eco-conscious are demanding better alternatives to the linear, single-use and dispose of economic model. As an enterprise on the cutting edge of the circular economy and localized raw material sourcing, we at ECOR are encouraged by these developments. It will likely be the pure economics of increasing raw materials costs, rather that sustainability objectives that prove to be the catalyst for growing the circular economy.
Whatever it takes, we are all in.