Trade restrictions intended to address environmental externalities can also distort production by limiting access to imported inputs. We examine this tradeoff using China’s 2017 waste import ban. Combining rich data from multiple sources, we exploit variation in pre-ban import exposure across cities and firms. Although the ban reduces satellite-detected dumping-site area and waste-sector methane emissions in exposed cities, it induces contrasting adjustments along the supply chain. Entry shifts toward collectors in small recycling markets and away from manufacturing-capable recyclers in large ones. Entry also declines in downstream industries using restricted materials. Incumbent firms holding pre-ban waste-import licenses scale down operations.