By constructing a multinational supply chain consisting of Chinese exporters and EU importers, this study investigates the recycling strategies of Chinese exporters in response to the European Union’s Carbon Border Adjustment Mechanism and the design of reward and punishment mechanisms by the Chinese government. The results indicate that, even though recycling may increase production costs, Chinese exporters may still adopt it to comply with carbon border adjustment mechanism due to its carbon reduction effects. The effectiveness of recycling in addressing the carbon border adjustment mechanism depends on its marginal cost effect; when the marginal cost effect is low, it can mitigate the negative impact of the carbon border adjustment mechanism, while a higher marginal cost effect may exacerbate it. The government can implement reward and punishment mechanisms based on recycling rates and carbon emission levels to promote recycling among Chinese exporters, thereby increasing their recycling rates, sales volumes, and profits, and reducing the negative impacts of the carbon border adjustment mechanism.