Tariffs as Environmental Protection: Evidence from the Global South after the China Garbage Shock

In the global waste trade, importers buy containers of waste and scrap to meet demand for raw materials, especially in the Global South. But post-processing leftovers generate localized negative externalities. I use the waste trade as a setting to establish that low-capacity states can and do use tariffs as a tool in their environmental policy repertoire. Product-level tariffs can serve as Pigouvian ’sin’ taxes that incentivize private market actors to limit transactions and/or increase state revenue, both channels that can result in improved environmental outcomes. For evidence, I leverage the ‘China garbage shock’: in 2017 China banned imports of twenty-six waste products (HS six-digit), which disrupted economic–environmental trade-offs in other, newly competitive markets awash in diverted imports. Using novel data on 179 traded waste products and product-level tariffs (1996–2020), I demonstrate that those that received the shock raised tariffs in ways consistent with environmental protection.