Trade wars are testing the limits of sustainable business – but must they derail it? Aastha Ojha, MSc Marketing and Strategy student at Warwick Business School argues that ethical commerce can survive global tensions through smarter strategies. From circular economies to blockchain tracking, solutions exist to bridge profit and planet. The real battle isn’t just tariffs – it’s redesigning trade itself before sustainability becomes collateral damage.    

“As history has repeatedly proven, one trade tariff begets another, then another—until you’ve got a full-blown trade war. No one ever wins, and consumers always get screwed.” Mark McKinnon

In today’s interconnected world, trade wars are more than just political and economic battles. They disrupt industries, businesses, and even the way we approach sustainability. Whether it’s tariffs on crucial raw materials or shifts in supply chains, companies often find themselves caught between profit margins and ethical commitments (World Trade Organisation      report, 2024). While much of the discussion revolves around economic losses and geopolitical tensions, the environmental and ethical consequences of these trade conflicts often go unnoticed (Council on Business Sustainability, 2019). Let’s take a closer look at how trade wars shake up sustainable business practices and what can be done to keep businesses on the right track.

The Economic Fallout and Sustainability Dilemmas

When trade wars flare up, businesses face unpredictable costs, and business practices may come to a halt. Suddenly, raw materials get pricier, supply chains get tangled, and companies scramble to stay profitable (Winston, 2023). Unfortunately, sustainability efforts often take the hit first. Why? Because when budgets tighten, eco-friendly initiatives, ethical sourcing, and long-term sustainability investments start to look like luxuries rather than necessities.

Take the U.S.-China trade war, for instance. When the U.S. imposed tariffs on Chinese imports, industries dependent on solar panels saw their costs skyrocket, making renewable energy investments much harder to justify (WTO, 2024). Meanwhile, the European Union’s carbon border tax—meant to encourage greener production–     ended up making some businesses hesitate on sustainability initiatives, fearing more trade tensions and economic strain (European Green Deal, 2024).

It’s not just businesses that feel the pinch, consumers do too. Consumers may switch to other brands due to increased prices, thereby ultimately affecting the profitability of the businesses.  During times of economic uncertainty, people tend to become more price-conscious, making it harder for companies to justify charging a premium for sustainable products. As a result, some companies scale back on corporate social responsibility (CSR) projects, delay green technology adoption, or divert investments away from sustainability-focused strategies.

Supply Chain Disruptions and Ethical Concerns

A sustainable business model relies heavily on stable, ethical supply chains. But when trade wars throw a wrench in the works, companies are forced to find alternative suppliers, sometimes in regions with weaker environmental and labour      protections (United Nations Sustainable Development Goals, 2024). This raises a big question: How do businesses maintain their sustainability commitments while adapting to new trade realities?

For example, during the U.S.-China trade war, many American companies shifted manufacturing to Vietnam and India. While this move helped avoid tariffs, it also created sustainability risks since regulatory oversight in these countries varies. Apparel brands, in particular, faced tough choices. Increased tariffs on Chinese textiles led to a rush toward cheaper manufacturing hubs, sometimes at the cost of fair wages and safe working conditions (CoBS, 2019).

It’s a tricky balancing act. Staying competitive while upholding ethical labour practices and environmental responsibility. But when companies chase lower costs in reaction to trade policies, they often end up in murky ethical waters.

The Environmental Impact of Trade Wars

Trade wars don’t just hurt businesses and consumers, they take a toll on the planet too. Protectionist policies often encourage local production, which might sound good at first. But here’s the catch: just because something is produced locally doesn’t mean it’s produced sustainably.

For instance, when companies move production away from China due to tariffs, they may end up relying on longer transportation routes, increasing carbon footprints (WTO, 2024). A similar issue arose when, due to trade conflicts, U.S. soybean imports shifted from China to Brazil, prompting Brazil to expand production by clearing forested land, including parts of the Amazon rainforest, leading to biodiversity loss, higher carbon emissions, and ecosystem disruption. 

The steel and aluminium tariffs during the U.S.-China trade war offer another example. Businesses scrambled to find alternative suppliers, but the switch often led to inefficient extraction and refining processes, increasing energy consumption and emissions. These shifts ultimately counteract global sustainability efforts, making it even harder to meet climate change goals.

Trade conflicts can also weaken international cooperation on environmental policies. Agreements like the Paris Accord rely on nations working together, but trade wars push countries into a competitive, rather than collaborative, mindset. When tariffs and retaliatory measures dominate international relations, sustainability goals often take a backseat. 

Policy and Corporate Strategies for Sustainable Resilience

So, how can businesses and policymakers tackle these challenges? While trade wars may be beyond their control, companies can still take steps to ensure that sustainability remains a priority.

Diversifying Supply Chains: Companies should avoid putting all their eggs in one basket. By sourcing materials from multiple regions, they can reduce their reliance on politically unstable areas while maintaining ethical and environmental standards. A great example is the European Union’s strategy to secure rare earth minerals from various suppliers rather than relying solely on China (European Green Deal, 2024).

Investing in Circular Economy Models: Reducing reliance on raw materials through recycling, refurbishing, and waste reduction can help businesses stay resilient amid trade uncertainties. The electronics industry has embraced this model, with companies investing in refurbishment programs to lessen dependence on newly mined materials 

Leveraging Green Trade Agreements: Governments can integrate sustainability into trade negotiations, ensuring that environmental commitments aren’t sacrificed in the name of economic protectionism. The European Green Deal, for instance, incorporates climate action into trade agreements to encourage eco-friendly business practices (European Green Deal, 2024).

Technological Innovation: Blockchain technology offers a way to ensure sustainability compliance even when shifting suppliers. By using blockchain, companies can track raw material origins, verify ethical sourcing, and prevent greenwashing. 

Corporate Advocacy: Businesses shouldn’t just adapt—they should push for change. Organisations      like the World Business Council for Sustainable Development (WBCSD) work with corporations to advocate for policies that promote both trade and sustainability. 

Consumer Engagement: Transparency goes a long way in maintaining consumer trust. Companies that communicate their sustainability efforts even in times of trade disruption can build loyalty and reinforce ethical business practices. Patagonia, for example, continues to uphold its sustainability pledges, proving that ethical business can be a competitive advantage. 

Trade wars pose a real challenge to sustainable business practices, disrupting supply chains, increasing environmental risks, and shifting corporate priorities toward short-term survival. However, companies don’t have to choose between economic survival and sustainability. With the right strategies, such as diversifying supply chains, investing in circular economies, and leveraging technology, businesses can navigate trade conflicts while staying true to their sustainability commitments.

Likewise, governments need to rethink trade policies to ensure they align with global climate goals rather than working against them. In a world where economic and environmental issues are deeply connected, sustainable trade isn’t just an option. It’s a necessity for the future (WTO, 2024).

Click here for a list of references used in this article.

Useful links:

• Link up with Aastha Ojha on LinkedIn
• Read a related article: Economy, Sovereignty and the ‘Buy Canadian’ Movement
• Discover Warwick Business School, United Kingdom
• Apply for the Warwick MBA.

Learn more about the Council on Business & Society

The Council on Business & Society (CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business, society, and planet including the dimensions of sustainability, diversity, social impact, social enterprise, employee wellbeing, ethical finance, ethical leadership and the place responsible business has to play in contributing to the common good.  

• Follow the CoBS on LinkedIn
• Download magazines and learning content from the CoBS website downloads page.

Member schools of the Council on Business & Society.

• ESSEC Business School, France, Singapore, Morocco
• FGV-EAESP, Brazil
• School of Management Fudan University, China
• IE Business School, Spain
• Indian Institute of Management Bangalore, India
• Keio Business School, Japan
• Monash Business School, Australia, Malaysia, Indonesia
• Olin Business School, USA
• Smith School of Business, Queen’s University, Canada
• Stellenbosch Business School, South Africa
• Trinity Business School, Trinity College Dublin, Ireland
• Warwick Business School, United Kingdom.