<p>Green design is capable of significantly reducing production costs per unit product and broadening market demand while promoting the recycling and reuse of waste products. This effect has a significant impact on the functioning of the closed-loop supply chain (CLSC). We formulated five game models to examine the impact of the “tax reduction subsidy”policy on green designs, recycling and disposal strategies, and operational performance of an apparel CLSC (ACLSC) in the context one that includes a clothing manufacturer, a retailer, a third-party recycler, and a third-party processor. The findings indicate that despite government taxation hindering apparel manufacturers from pursuing green design, the tax reduction from recycling and green design subsidy can boost the motivation of recyclers and enhance the overall performance of an ACLSC. If the consumers’recycling price sensitivity or the technical parameters of wasted apparel are more significant than the green design subsidy, the tax reduction on recycling has a more pronounced impact on improving the green design level. Regardless of the disposal channel, recycling by the clothing manufacturer is more conducive to ACLSC’s economic performance than retailer and third-party recycling. The same results can be obtained for retailer and third-party recycling when the disposal channel is the same. Manufacturer processing of used clothing is always preferable to third-party handling regardless of which entity in the ACLSC manages the recycling.</p>