Deutsche Bank

Research

Tariffs primer
Matthew Luzzetti, Brett Ryan, Justin Weidner, Amy Yang, Raj Bhattacharyya,
Deutsche Bank Center, 1 Columbus Circle
New York, New York 10019
Tel: 212 250 6161

January 2025

IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE
DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.
 Page
Table of contents
Number

2. A history of US trade protectionism 08

3. Legal pathways to trade actions 13

4. The last trade war: A review 18

5. Economic impact of 2018-19 trade war 35

6. Estimates of impact of Trade war II 45

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Luzzetti, Ryan, Weidner January 2025
Trump’s potential trade policies drawing headlines

Source: Bloomberg Finance LP, Reuters, Financial Times, New York Times, Marketwatch.com, Deutsche Bank
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2010 DB Blue template
President-elect Trump has promised to extend &
intensify the trade war of 2018-19
Trump’s latest tariff plan: An Up-to-Date Timeline
Pre-election

• Universal baseline tariff : A minimum 10-20% tariff on all imported goods and services
• Reciprocal tariffs: Matching the tariff rates imposed on exports of US goods and services
to other economies
• China: Withdrawal of China's most favored nation status. Higher tariff rates on imports from
China; 50-60% have been mentioned
• Other tariffs: Return of tariffs on steel or the introduction of new tariffs on imports from
Europe (e.g., autos)

Post-election
• Canada and Mexico: impose 25% tariffs on all products based on satisfactorily stopping
illegal immigration and the flow of illegal drugs such as fentanyl
• China: additional 10% tariff, above any additional tariffs, until Beijing cracks down on the
production of materials used in making fentanyl
• BRICs: commit to not creating a new currency or back any other currency to replace the
U.S. dollar, or face 100% Tariffs on US import
• Europe: To face significant tariffs unless they substantially increase imports of US oil, gas
• Universal tariff on critical imports: Targeted sector-based tariffs – e.g. steel & aluminum
• Greenland: Tariffs threatened on Denmark to encourage Greenland to become part of US
Source: Deutsche Bank
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Multiple objectives of trade protectionism

Short term

1. Equalize the treatment of trade flows across economies

2. Gain better access for US exports

3. Narrow the trade deficit

Longer term
Reorient global manufacturing activity and employment back to
1.
the US
2. Serve the geostrategic purpose of countering China's rise
Reduce vulnerability of strategically important industries/supply
3.
chains
Source: Deutsche Bank
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Trump’s historical quotes on trade

Trump’s Comments on Trade and Tariffs from History Year(s)

“I believe it's very important that you have free trade, but we don't have free trade 1987 interview
right now." with Larry King

1989 Interview
“I believe very strongly in tariffs; America is being ripped off. We’re a debtor nation,
with Diane
and we have to tax, we have to tariff, we have to protect this country.”
Sawyer
Oct 2024
“we’re going to protect those (American) companies with strong tariffs, because I’m
Interview at
a believer in tariffs…but to me the most beautiful word in the dictionary is tariffs.
Economic Club of
And it’s my favorite word”
Chicago

Sources: Compiled from different news sources, Deutsche Bank

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Quotes from Trump’s economic advisors on trade
Comments on Trade and Tariffs by Trumps Econ team
“Speaking for myself, I view China’s stated ambitions and observed actions as a
generational challenge for the United States. Trade and investment with China
not only have failed to live up to expectations, but they have also actively Jamieson L. Greer
harmed U.S. economic and national security interests”. (US Trade Representative)
Testimony Before the U.S.-
“…U.S. policy toward China has shifted to a much more pragmatic and active China Economic & Security
approach since 2017. This new strategy is much more in line with objectives Review Commission: May
such as growing the manufacturing base, increasing employment opportunities 2024
for the working class, and protecting American technology and national
security.”
“I think we should put tariffs on stuff we make and not put tariffs on stuff we
Howard Lutnick
don’t make and of course it’s a bargaining chip. … tariffs are an amazing tool by
(Commerce Secretary)
the president to use , they’re amazing tool but he understands don’t tariff stuff
Interview with CNBC
we don’t make…. We’ll make a bunch of money on tariffs but mostly this
everybody else is going to negotiate with us and we will be more fair.”
“Tariffs cause a strong dollar. So, a weaker dollar with tariffs is an economic
abnormality.” Scott Bessent
(Treasury Secretary)
“Tariff gun will always be loaded and on the table but rarely discharged.” Interview with WSJ, Nov
2024
“The truth is that tariffs have a long and storied history as both a revenue-raising An op-ed for Fox News, Nov
tool and a way of protecting strategically important industries in the U.S. 2024
President-elect Trump has added a third leg to the stool: tariffs as a negotiating
tool with our trading partners.”
Sources: Compiled from different news sources, Deutsche Bank
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 A history of US trade
protectionism

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The US has a long history with trade protectionism

History of US Tariff Rates 1789-2023

% Tariff Act of
Tariff Abominations Smoot-Hawley %
of 1828 Tariff Act 1930 WTO First Trump trade
1789 Morrill Tariff 1861 GATT 1947
Tariff Act of 1995 war in 2018
60 1816 60

50 50

40 40

30 30

20 20

10 10

0 0
1775 1800 1825 1850 1875 1900 1925 1950 1975 2000 2025
Note: The tariff rate is the customs duty revenue as a percent of Dutiable imports
Sources: Historical Statistics of the United States Ea424-434, BEA, Deutsche Bank
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2010 DB Blue template
World trade rose as share of GDP from WWII to GFC,
but has since plateaued

World: Value of exported goods as a share of GDP, 1827-2023

% Smoot-Hawley First Trump trade %
Tariff Act 1930 GATT 1947 war in 2018
27 Tariff Abominations
of 1828 Morrill Tariff 1861 WTO 1995 27
24 24
21 21
18 18
15 15
12 12
9 9
6 6
3 3
1827 1842 1857 1872 1887 1902 1917 1932 1947 1962 1977 1992 2007 2022
Total value of merchandise exports divided by gross domestic product, expressed as a percentage

Sources: Our World In Data, World Bank, Haver analytics, Deutsche Bank
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After increasing steadily since the mid-1900s, the trade
share of US GDP has declined over the past 15 years

U.S. Total Trade as % of GDP

Tariff Act of First Trump
Smoot-Hawley GATT 1947 WTO
1816 Tariff Abominations Morrill Tariff 1861 trade war in
Tariff Act 1930 1995
of 1828 2018
30% 30%

25% 25%

20% 20%

15% 15%

10% 10%

5% 5%

0% 0%
1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020

Source: World Trade Historical Database, BEA, Haver Analytics, Deutsche Bank
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2010 DB Blue template
US trade deficit has been persistently negative over
the past four decades

U.S. Goods Trade Balance as % of GDP

Smoot-Hawley WTO First Trump
Tariff Act of GATT 1947
Morrill Tariff 1861 Tariff Act 1930 1995 trade war in
1816 Tariff Abominations
10% of 1828 2018 10%
8% 8%
6% 6%
4% 4%
2% 2%
0% 0%
-2% -2%
-4% -4%
-6% -6%
-8% -8%
-10% -10%
1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020

Source: World Trade Historical Database, BEA, Haver Analytics, Deutsche Bank
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2010 DB Blue template
 Legal pathways to trade
actions

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Summary of 2018-19 experience

Summary of 2018-19 experience

During the last trade war, the Trump administration appealed primarily to two legal
pathways to support trade actions:

Section 232 of the Trade Expansion Act of 1962: Allows for the implementation of
1.
tariffs driven by national security considerations

Section 301 of the Trade Act of 1974: Allows for the implementation of tariffs in
2. response to unfair trade practices by US trade partners

This time, another provision – The International Emergency Economic Powers Act of
1977 – may be used

Source: CATO Institute, Deutsche Bank

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Deep dive: Legal pathways to trade actions

International Emergency Economic Section 232 of the Trade

Section 301 of the Trade Act of
Powers Act of 1977 (50 U.S.C. § Expansion Act of 1962 (19
1974 (19 U.S.C. § 2411)
1701 et seq.) U.S.C. § 1862)
Unfair foreign trade practices,
Issue/purpose
“Unusual or extraordinary” threats including trade agreement
Imports that threaten national
to national security, foreign policy, violations, or acts that are
security
or the economy unjustifiable or unreasonable and
burden US commerce

Direct the USTR to impose tariffs

or other trade restrictions;
withdraw from or suspend trade
Impose embargoes or sanctions;
Powers granted to Adjust imports of the products agreement concessions; enter
block imports and exports; block
the president to that threaten national security into binding agreements that
numerous types of transactions,
restrict trade and their derivatives require the targeted country to
sales, and acquisitions
eliminate the practice(s) at issue
or provide the United States with
compensatory trade benefits

Property, including financial assets

Targets of actions
and currencies, in which a foreign Imports of specific products Imports of all products from a
taken or directed
country, organization, or individual from all countries specific country
by the president
has interest

Sources: CATO Institute, Deutsche Bank

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Legal pathways to trade actions (cont’d)
International Emergency Economic Section 232 of the Trade
Section 301 of the Trade Act of
Issue/purpose Powers Act of 1977 (50 U.S.C. § Expansion Act of 1962 (19
1974 (19 U.S.C. § 2411)
1701 et seq.) U.S.C. § 1862)
1) An action must be specific
to a foreign country 2) For
instances where the USTR is
statutorily mandated to take
action, such action must be
equivalent in value to the
burden or restriction imposed
on US commerce (this limit is
not applicable to discretionary
actions) 3) If the practices at
issue are covered by the
provisions of US trade
None, for the most part; if an agreements (i.e., the WTO
Temporal, numerical,
The action is effective until the action targets imports of agreements or US free trade
geographical, or
president or Congress terminates the petroleum or petroleum agreements), the USTR must
circumstantial limits to
national emergency declared under products, Congress may render initiate proceedings under the
powers granted to the
the National Emergencies Act (NEA) it ineffective by passing a dispute settlement
president
disapproval resolution mechanisms of the relevant
agreements 4) If an action is
taken within a four-year period
and before the end of that four-
year period neither the
petitioner of the Section 301
investigation nor any
representative of the domestic
industry that benefits from the
action submits a request for
continuation of the action, the
action shall terminate at the
end of the four-year period
Sources: CATO Institute, Deutsche Bank
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Legal pathways to trade actions (cont’d)

International Emergency Economic Section 232 of the Trade

Section 301 of the Trade Act
Issue/purpose Powers Act of 1977 (50 U.S.C. § 1701 et Expansion Act of 1962 (19
of 1974 (19 U.S.C. § 2411)
seq.) U.S.C. § 1862)

The USTR must initiate a

Issuance of a report by the
Section 301 investigation and
Prerequisites for 1) A national emergency is declared Department of Commerce’s
decide (or be mandated) to
exercising under the NEA 2) The president must Bureau of Industry and
take action following the
presidential consult with Congress “in every possible Security showing that imports
recommendations of the
authority instance” before taking action of certain products constitute
Section 301 committee that
a threat to national security
conducted the investigation

1) The president must “immediately”

report to Congress the factual elements
The USTR must submit a
surrounding the exercise of IEEPA
report to the House of
authorities—-including the circumstances
Representatives and the
that necessitate taking action(s) under
Senate semiannually
the statute; the authorities exercised and Within 30 days after making a
describing the Section 301
action(s) taken; and the countries determination to take (or not
petitions filed and
Requirements to affected by the action(s)—and their take) action, the president
determinations made; the
report to Congress justification for exercising them in light of must transmit a report to
status of ongoing Section 301
those factual elements 2) At least once Congress on the reasons for
investigations or proceedings;
every six months, the president must taking (or not taking) action
the actions taken or reasons
report to Congress on additional actions
for taking no actions; and the
taken since the last report and any
commercial effects of the
changes to the facts and justifications
actions taken
reported upon taking action under the
statute

Sources: CATO Institute, Deutsche Bank

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 The last trade war:
A review

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A timeline of the last trade war

US China Trade war Tariffs: An Up-to-Date Timeline

2018
February 7 June 1 August 23
US Section 201 tariffs on solar panels and US ends Section 232 steel and aluminum tariff US Section 301 tariffs of 25% ($16 billion, List 2)
washing machine exemptions for EU, Canada, and Mexico. and China’s retaliation ($34 billion)
(Argentina, Brazil, and South Korea had earlier
March 23 agreed to quotas) September 24
US Section 232 tariffs on steel and aluminum, US Section 301 tariffs of 10% ($200 billion, List
temporarily exempting Argentina, Australia, July 1 3) and China’s retaliation ($60 billion)
Brazil, EU, Canada, Mexico, and South Korea China's MFN tariffs cut on consumer goods,
autos, and IT products November 1
April 2 China's MFN tariffs cut on industrial goods
China's retaliation to US Section 232 tariffs July 6
US Section 301 tariffs of 25% ($34 billion, List 1)
May 1 and China’s retaliation ($34 billion)
China's MFN tariffs cut on pharmaceuticals
August 13
US Section 232 tariffs increase from 25% to
50% on imports of steel from Turkey

2019
January 1 May 21 September 1
China suspends retaliation against US autos and US reduces Section 232 tariff on steel imports US Section 301 tariffs of 15% (subset of $300
parts (Section 301) and reduces MFN tariff rates from Turkey from 50% to 25% billion, List 4A) and China’s retaliation on some
for 2019 US products (subset of $75 billion)
June
February 7 US Section 301 tariff (10% to 25% increase on October 18
US Section 201 tariffs reduced on solar panels List 3, effective June 15) and China’s retaliation US imposes Section 301 tariffs on selected
and washing machines in second year of policy on some US products (subset of $60 billion, imports from European Union after WTO
effective June 1) authorization in Airbus dispute
May 20
US exempts Canada and Mexico from Section July 1
232 tariff on steel and aluminum in exchange for China’s MFN tariff cut on IT products
both agreeing to VERs

Source: Peterson Institute for International Economics, Deutsche Bank

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A timeline of the last trade war (cont’d)
US China Trade war Tariffs: An Up-to-Date Timeline (Cont.)
2020
January 1 February 14 August 16
China adjusts MFN tariff rates for 2020, and US US Section 301 tariffs of 15% imposed on September 1, US reimposes Section 232 tariff of
reduces tariffs on imports from Japan under US 2019 (List 4A) cut to 7.5%, and China’s retaliatory tariffs 10% on certain aluminum products
Japan Trade Agreement imposed on September 1, 2019, cut in half from Canada

February 7 March 5 September 1

US Section 201 tariffs reduced on solar panels and US adjusts Section 301 tariffs on selected imports from US eliminates re-imposed Section 232
washing machines in second year of policy European Union related to Airbus dispute tariff of 10% on certain aluminum
products from Canada
February 8 July 1
US Section 232 tariffs extended to imports that use China’s MFN tariffs cut on IT products
aluminum and steel

2021
Jan 1 February 7 May 1
China adjusts MFN tariff rates for 2021, and US US Section 201 tariffs reduced on solar panels and China’s MFN tariffs cut on some steel
reduces tariffs on imports from Japan under US- washing machines in fourth year of policy (washing products
Japan Trade Agreement machines had received an extension)
July 1
March China’s MFN tariffs cut on IT products
US suspends Section 301 tariffs on selected imports from
European Union (March 11) and United Kingdom (March
4) related to Airbus Dispute

2022
January 1 April 11 June 1
China adjusts MFN tariff rates for 2022; US US Section 232 tariffs on imports of steel from US Section 232 tariffs on imports of steel
Section 232 tariffs on imports of steel and Japan converted to a tariff-rate quota and aluminum from the United Kingdom
aluminum from the European Union converted to a tariff-rate quota
converted to a tari-rate quota May 1
China’s MFN tariffs cut to zero on coal July 1
February 7 China’s MFN tariffs cut on IT products
US Section 201 tariffs reduced on solar panels
and washing machines in fifth year of policy
(solar panels had received an extension)
Source: Peterson Institute for International Economics, Deutsche Bank
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A timeline of the last trade war (cont’d)

US China Trade war Tariffs: An Up-to-Date Timeline (Cont.)

2023
January 1 February 7
April 1
China’s MFN tariffs cut on selected products; US Section 201 tariffs reduced on solar
China’s MFN tariffs on coal revert to higher,
Effective MFN tariffs increased on frozen panels in sixth year of policy; Section 201
binding rate
chicken under conversion from special to ad- tariffs on washing machines expire
valorem rate
July 7

Tariffs on washing machines expired in Feb

2023 after an initial 3-year period and a 2-year
extension. The Biden administration provided
a two-year suspension of solar panel tariffs
for four Southeast Asian nations beginning in
2022. The update adjusts the revenue and
economic results for imposed tariffs.

2024
Dec 3

US further expands chip export control with

140 additions to the Entity List, China
announces retaliatory export controls on
gallium, germanium, and antimony

Source: Peterson Institute for International Economics, Tax Foundation, Deutsche Bank
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Bilateral tariff rates between the US and China

US-China tariff rates toward each other and rest of world (ROW)
% Chinese tariffs on US exports Chinese tariffs on ROW exports
US tariffs on Chinese exports US tariffs on ROW exports
25 100.00%

Trade war Phase-one agreement

90.00%

20 80.00%

70.00%

15 60.00%

50.00%

10 40.00%

30.00%

5 20.00%

10.00%

0 0.00%

Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23

Source: Peterson Institute for International Economics, Deutsche Bank

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Percent of trade subject to tariffs

Percent of US-China trade subject to tariffs

% Chinese exports subject to US tariffs US exports subject to Chinese tariffs
100 1

Trade war Phase-one agreement

90 0.9

80 0.8

70 0.7

60 0.6

50 0.5

40 0.4

30 0.3

20 0.2

10 0.1

0 0

Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23

Source: Peterson Institute for International Economics, Deutsche Bank

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Steel and aluminum imports fell with tariffs

Imports Affected by US Tariffs (2018=100)

Index Index
120 120
Section 232 Steel (March 2018) Section 232 Aluminum (March 2018)

100 100

80 80

60 60

40 40

20 20
2017 2018 2019 2020 2021 2022 2023

Source: Tax Foundation, Deutsche Bank

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US goods imports from China clearly declined with
the trade war and haven’t recovered to trend

Value of US goods imports from China and rest of world, 2016–2022

Index, China ROW Trendline
June 2018=100
150
July 2018: Pre-trade war trend
US starts tariff war
125

100

75

50

Aug-20
Aug-16

Aug-17

Aug-18

Aug-19

Aug-21

Aug-22
May-19
Nov-16

May-17

May-18

May-20

May-21

Nov-21

May-22
Nov-17

Nov-18

Nov-19

Nov-20
Feb-17

Feb-18

Feb-19

Feb-20

Feb-21

Feb-22
Source: Peterson Institute for International Economics, Deutsche Bank
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US imports by tariff type

US monthly goods imports from China and rest of world by trade war tariff list
Index, China, Lists 1,2,3 ROW, Lists 1,2,3 China, List 4A
June 2018=100 ROW, List 4A China, not on any List ROW, not on any List
July 2018: March 2020:
160 Global trade collapse
US starts tariff war

140 Sept 2019:

US imposes last round
120 of tariffs (List 4A)

100

80

60

40
Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23

Source: Peterson Institute for International Economics, Deutsche Bank

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US imports of tariffed items clearly declined in 2019

US annual goods imports from China by trade war tariff list, millions of US dollars (current)

600 $ Bil. Not on any tariff list Tariff lists 1,2,3 Tariff list 4A
Total: 538.515 536.754
505.165 504.935
500 106 102
List 4A
(7.5% tariffs)
102 449.111 96
432.684

400 99 91
Lists 1,2,3
188 (25% tariffs)
176
300 235
257
175 156

200
No trade war
tariffs
247 (not on any list)
233
100 169 175 175 185

0
2017 2018 2019 2020 2021 2022

Source: Peterson Institute for International Economics, Deutsche Bank

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Government receipts from tariffs rose substantially in
response to the 2018-19 trade war

Federal Government Current Tax Receipts: Taxes on production and imports: Customs duties
Billions of Dollars Billions of Dollars
100 100

80 80

60 60

40 40

20 20

0 0
1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019

Source: BEA, FRED Economic Data, Deutsche Bank

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2010 DB Blue template
Despite recent increases, US still has some of the
world’s lowest tariff rates in 2022

Tariff rate: weighted mean, all products, 2022

% MFN weighted mean Applied rate, weighted mean %
12 12
10 10
8 8
6 6
4 4
2 2
0 0

Australia
Korea

Brazil

Germany
India
Argentina

UK

Italy
Turkey

Mexico
Indonesia

China
Canada
European Union

France

U.S.
Japan
South Africa

Saudi Arabia
Russia

Source: World Bank, WITS database ,Haver Analytics, Deutsche Bank

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2010 DB Blue template
Non-tariff trade barriers also rose

Unted States reported number of measures in force against rest of World

# of Measures # of Measures
Anti-dumping Countervailing
120 120

100 100

80 80

60 60

40 40

20 20

0 0
2002

2009

2017
1995
1996
1997
1998
1999
2000
2001

2003
2004
2005
2006
2007
2008

2010
2011
2012
2013
2014
2015
2016

2018
2019
2020
2021
2022
2023
2024*
<1995

* Data relates to the January to June period only. Measures in force on or after 01/01/2020, by year application .Please note that data on trade remedy actions refers only to procedures
that led to the application of trade remedy measures which were in force on or after 01/01/2020. Historical information on trade remedy actions referring to measures and investigations
which were terminated before 31/12/2019 is currently being verified and will be uploaded on the WTO Data Portal in due course.

Source: WTO Trade Remedied Data Portal, Deutsche Bank

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Non-tariff barriers rose against China

Unted States reported number of measures in force against China

# of Measures # of Measures
Anti-dumping Countervailing
35 35
30 30
25 25
20 20
15 15
10 10
5 5
0 0
2009
2010
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024*
<1995

* Data relates to the January to June period only. Measures in force on or after 01/01/2020, by year application. Please note that data on trade remedy actions refers only to procedures
that led to the application of trade remedy measures which were in force on or after 01/01/2020. Historical information on trade remedy actions referring to measures and investigations
which were terminated before 31/12/2019 is currently being verified and will be uploaded on the WTO Data Portal in due course.
Source: WTO Trade Remedied Data Portal, Deutsche Bank
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 Economic effects of tariffs
in theory

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Textbook view: By lifting prices of imports, surplus shifts
from consumers to producers & dead-weight loss created
Price

Textbook view
Demand Supply
- Tariffs increase
prices, which
reduces imports
- The effects: shifts
Consumer Surplus
surplus from
tariff consumers to
P
producers, raises

Size of Tariff
Producer Surplus revenue, and
Social Tax Revenue
Social world
Loss Loss P creates a social loss

Important caveat
- Assumes starting
Q1 Q2 Q3 Q4 point is free/fair
Quantity
Quantity of imports (with Tariff) trade, which may
Quantity of imports (without Tariff) not be the case
Source: Deutsche Bank
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Luzzetti, Ryan, Weidner January 2025
Mechanics of a trade war: How it can impact the
economy
Channels by which tariffs can negatively impact the economy
- Higher tariffs depress real incomes by raising prices, thereby denting consumer
spending
- Retaliatory tariffs from foreign countries depress US exports and output
- Dollar appreciation could limit the price rise but would also diminish the decline in US
imports and depress US exports, thereby reducing net exports and GDP
- These channels can be amplified by rising uncertainty and tightening financial
conditions, which can depress business investment

Channels by which tariffs can positively impact the economy

- As foreign goods and services become more expensive, consumers and businesses
may turn to domestically produced goods and services (where substitutes are
available), limiting imports and lifting output
- If tariffs are broad-based and persistent enough, they can incentivize a return of
production to the US, lifting US output and employment
- Over the longer-term, targeted tariffs could help protect critical industries and ensure
more resilient production / supply chains
- In the past, protectionism has helped to foster infant industries
Source: Deutsche Bank
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 Economic impact of 2018-
19 trade war

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Last trade war dented global manufacturing
sentiment and global trade

Global manufacturing PMI and world exports

Index, 3monh MA y/y % chg
55 Start of trade war 20

54 15
10
53
5
52
0
51
-5
50
-10
Global manufacturing PMI (ls, 4m lag)
49 -15
Growth in world exports (rs)
48 -20
2015 2016 2017 2018 2019

Source: IHS/Markit, IMF, Haver Analytics, Deutsche Bank

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Last trade war reduced manufacturing sentiment and
new export orders in the US

New export orders and ISM manufacturing

Index ISM manufacturing: new export orders (3m lag) Index
65 ISM manufacturing: composite PMI 65

60 60

55 55

50 50
Start of trade war
45 45

40 40
2015 2016 2017 2018 2019

Source: ISM, Haver Analytics, Deutsche Bank

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Luzzetti, Ryan, Weidner January 2025
Financial conditions tightened over 2018

Financial Conditions Impulse on Growth

% %
Baseline 3-Year Lookback
0.8 0.8
One-Year Lookback

0.4 Tighter financial 0.4

conditions

0.0 0.0

-0.4 -0.4

Easier financial
-0.8 -0.8
conditions
Start of trade war
-1.2 -1.2
15 16 17 18 19

Source: FRB, Haver Analytics, Deutsche Bank

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Luzzetti, Ryan, Weidner January 2025
Last trade war led to declines in manufacturing
employment

Manufacturing employment clearly slowed relative to services during the trade war
6-month MA Change in Private Service-Providing Employment (ls) 6-month MA,
thous. thous.
Change in Manufacturing Employment (rs)
220 30

200 25
20
180
15
160
10
140
5
120
0
100 -5
80 -10
2016 2017 2018 2019

Source: BLS, Haver Analytics, Deutsche Bank

Deutsche Bank 39
Luzzetti, Ryan, Weidner January 2025
Core goods inflation accelerated around the
implementation of tariffs, though not all was tariffs

Core goods prices accelerated sharply following the imposition of tariffs

% 6-month CPI-U: Services Less Energy Services (ls) % 6-month
Chg AR. CPI-U: Commodities Less Food & Energy Commodities (rs) Chg AR.
3.6 Highest since 2
November 2011

3.2
1

2.8
0
2.4

-1
2.0

1.6 -2
2015 2016 2017 2018 2019

Source: BLS, Haver Analytics, Deutsche Bank

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Luzzetti, Ryan, Weidner January 2025
Appliance prices took a level shift up right after the
washing machine tariffs in 2018

PCE: Major Household Appliances Price Index

Index, 2017 = 100 Index, 2017 = 100
130 130
125 125
120 120
CE: Major Household Appliances Price Index
115 115
Washing
110 machine tariffs 110
introduced
105 105
100 100
95 95
90 90
2014 2015 2016 2017 2018 2019

Source: BLS, Haver Analytics, Deutsche Bank

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Luzzetti, Ryan, Weidner January 2025
Trade policy uncertainty spiked to record highs in
response to the trade war; has spiked once again

Trade Policy Uncertainty (TPU) Index

Index Index
400 US Presidential Election Nov 2024 400

350 US announced tariffs (10% to 25%

increase on List 3, and China’s
350
China’s MFN tariffs
retaliation on some US products
cut on IT products
300 US Section 232 tariffs
300
on steel and aluminum

250 US ends steel & aluminum 250

tariff exemptions for EU,
Canada, and Mexico. TPP Withdrawal
200 200
US Election
Trump 2020
150 Election 150
US tariffs on imports of
100 steel & aluminum from 100
UK converted to tariff
rate quota
50 50

0 0
60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11 14 17 20 23

Source: Caldara et. al (2020), Deutsche Bank

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Luzzetti, Ryan, Weidner January 2025
Research from Fed staff shows that spikes in trade
policy uncertainty tend to depress GDP

%
Effects of trade policy uncertainty shocks on U.S. GDP
% Total effect of trade uncertainty on level of real GDP
Effect of 1st wave only
0.0

-0.2

-0.4

-0.6

-0.8

-1.0

-1.2

-1.4
18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 20Q1 20Q2 20Q3 20Q4

Source: Caldara et. al (2019), Deutsche Bank

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Luzzetti, Ryan, Weidner January 2025
Academic research found a wide range of estimates
on the pass-through of tariffs to inflation
Studies/papers Pass-through estimate Details / Comments
Examined the tariffs on washing machines,
“Complete pass-through of tariffs to duty-inclusive solar panels, aluminum, steel, and goods
Fajgelbaum et al. (2020)
prices” from EU and China imposed in 2018 and
2019
“US tariffs continue to be almost entirely borne by US
firms and consumers.” “we have found that in most
Amiti et al. (2020) US customs data through October 2019
sectors, these US tariffs have been completely passed on
to US firms and consumers”
Overall, 10% point tariff increase on a good increased the
Cavallo et al. (2019) good’s price for final consumers by 0.44% after 1 year,
relative to other goods in the sector.
On the firm side, U.S. manufacturers gained
little from the anti-dumping policies
A $1 increase in tariffs on solar panels increased the final
Houde and Wang (2021) whereas U.S. installers were largely
price of an installed solar panel system by $1.34.
negatively affected, as well as Chinese
manufacturers.
Washing machine prices increased by about $86 per unit
in the months following tariffs—and dryer prices
Flaaen et al. (2020)
increased by $92 per unit, even though dryers were not
subject to the tariffs.
First three tranches of tariffs on Chinese goods raised
consumer prices by 0.1 % points. and 0.4% point to price
SF Fed piece (Hale et al.) inflation for business investment goods. If implemented,
(2019) an across-the-board 25% tariff on all Chinese imports
would raise consumer prices an additional 0.3% point and
investment prices an additional 1% point.

Source: Fajgelbaum et al. Amiti et al., Cavallo et al., Houde and Wang, Flaaen et al., SF Fed piece (Hale et
al.), Deutsche Bank
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Luzzetti, Ryan, Weidner January 2025
 Estimates of impact of
Trade war II

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Luzzetti, Ryan, Weidner January 2025
How will proposed tariffs impact the US economy?
Tariff Assumption Change in Real GDP Description Source
-0.50% Tax Foundation
-0.16% (without retaliation)
American Action Forum
-0.31% (with retaliation)
-0.36% (high) to -0.07% (final year) Peterson Institute for
10-year range
-0.88% to -0.24% with retaliation International Economics
-1.04%, (with simulated retaliation) 2025
10% Universal baseline -2.82% (with simulated retaliation) 2026
Moody’s
tariff -3.45% (with simulated retaliation) 2027
-3.61% (with simulated retaliation) 2028
-0.5% with retaliation 2025
Euromonitor
-0.9% with retaliation 2026
-0.4% to -0.6%
IMF
-0.4% (with retaliation)
-0.19% (high) to -0.12% (final year) Peterson Institute for
60% China 10-year range
-0.43% to -0.21% with retaliation International Economics
-0.80% (without retaliation)
Tax Foundation
-1.2% (with retaliation)
10% Universal, 60% China
-0.5% (without retaliation)
The Budget Lab
-0.64% (with retaliation)
-1.3%
Tax Foundation
-1.7% with partial retaliation
20% Universal, 60% China
-0.64% (without retaliation)
-0.95% (with retaliation)
10% Broad/60% −1.0% (without retaliation)
The Budget Lab
China/Additional Mexico −1.1% (with retaliation)
20% Universal, 60% China -1.15% (without retaliation)
Additional Mexico -1.43% (with retaliation)
Aggressive US Tariff -0.4% to -0.8% (without retaliation)
Fitch
Scenario -0.4% to -1.1% (with retaliation)
Source: Tax Foundation, American Action Forum, PIIE, Moody’s, Euromonitor, IMF, Yale Budget Lab, Fitch, Deutsche Bank
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Luzzetti, Ryan, Weidner January 2025
Revenue estimates of tariff policies

Estimates 10y Revenue Impact ($tn) Description Source

$2.4 No Retaliation
CRFB
$2.0 With Retaliation
10% Universal Baseline Tariff
$2.0 No Retaliation
$1.7 With Retaliation Tax Foundation
$3.3 No Retaliation
$2.8 With Retaliation
20% Universal Baseline Tariff
$4.1 No Retaliation
CRFB
$3.2 With Retaliation
$2.6 No Retaliation
10% Broad/60% China
$2.2 With Retaliation
$2.6 No Retaliation
10% Broad/60% China/Additional Mexico The Budget Lab
$2.1 With Retaliation
$4.3 No Retaliation
20% Broad/60% China/Additional Mexico
$3.2 With Retaliation
10% Baseline Tariff, Excluding Free Trade $1.4 No Retaliation
Agreement Countries $1.1 With Retaliation
20% Baseline Tariff, Excluding Free Trade $2.4 No Retaliation
CRFB
Agreement Countries $1.9 With Retaliation
$1.5 No Retaliation
25% Tariff on Goods from Canada and Mexico
$1.2 With Retaliation

Source: CRFB, Tax Foundation, Yale Budget Lab, Deutsche Bank

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 Matthew Luzzetti
212-250-6161
matthew.luzzetti@db.com

Matthew Luzzetti is Chief US Economist and Head of US Economic

Research at Deutsche Bank in New York. He was previously an economist
in DB's Office of the Chief Economist in London. Matthew's research
focuses primarily on the US economy and Fed policy, and he regularly
contributes to DB's global economics publications. In 2017, Matthew was
named to Business Insider's Rising Stars on Wall Street Under 35. His
research has appeared in several books on economic policy and in top
macroeconomics journals.

Matthew holds a Ph.D. in Economics from the University of California, Los

Angeles. While at UCLA, he worked at the U.S. Department of the
Treasury in the Office of Financial Research. Prior to graduate school, he
spent two years as a research analyst in the macroeconomics department
at the Federal Reserve Bank of Philadelphia.

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16/01/2025 16:17:34 2010 DB Blue template
 Brett Ryan
212-250-6294
brett.ryan@db.com

Brett Ryan joined Deutsche Bank's US Economics Research team in May

2010. Prior to joining the team, Brett spent five years at Deutsche Bank in
the institutional equity research sales group. Brett has a Bachelor of Arts
degree from the University of Pennsylvania; majoring in politics, philosophy
and economics

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 Justin Weidner
212 469-1679
justin-s.weidner@db.com

Justin Weidner is an Economist in Deutsche Bank’s US Economics team in

New York. Justin’s research focuses primarily on the US economy and Fed
policy, where he regularly contributes to DB’s global economics
publications.

His research has also appeared in a major economic policy volume and
several other economics journals. Justin obtained a Ph.D. in Economics
from Princeton University. Prior to graduate school, he spent three years
as a research associate in the macroeconomics department at the Federal
Reserve Bank of San Francisco.

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Appendix 1
Important Disclosures
*Other Information Available upon Request
Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other
vendors. Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made
on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our
website at https://research.db.com/Research/Disclosures/FICCDisclosures. Aside from within this report, important risk and conflict disclosures can also be found at
https://research.db.com/Research/Disclosures/Disclaimer. Investors are strongly encouraged to review this information before investing.

Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the
undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view
in this report. Matthew Luzzetti, Brett Ryan, Justin Weidner, Amy Yang

Attribution
The authors wish to acknowledge the contributions made by Raj Bhattacharyya, an employee of Acuity Knowledge Partners, a
third-party provider to Deutsche Bank in the preparation of this report.

Deutsche Bank 51
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January 2023
16/01/2025 16:17:35 2010 DB Blue template
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Backtested, hypothetical or simulated performance results have inherent limitations. Unlike an actual performance record based on trading actual client portfolios, simulated
results are achieved by means of the retroactive application of a backtested model itself designed with the benefit of hindsight. Taking into account historical events the
backtesting of performance also differs from actual account performance because an actual investment strategy may be adjusted any time, for any reason, including a response
to material, economic or market factors. The backtested performance includes hypothetical results that do not reflect the reinvestment of dividends and other earnings or the
deduction of advisory fees, brokerage or other commissions, and any other expenses that a client would have paid or actually paid. No representation is made that any trading
strategy or account will or is likely to achieve profits or losses similar to those shown. Alternative modeling techniques or assumptions might produce significantly different
results and prove to be more appropriate. Past hypothetical backtest results are neither an indicator nor guarantee of future returns. Actual results will vary, perhaps materially,
from the analysis.

The method for computing individual E,S,G and composite ESG scores set forth herein is a novel method developed by the Research department within Deutsche Bank AG,
computed using a systematic approach without human intervention. Different data providers, market sectors and geographies approach ESG analysis and incorporate the
findings in a variety of ways. As such, the ESG scores referred to herein may differ from equivalent ratings developed and implemented by other ESG data providers in the market
and may also differ from equivalent ratings developed and implemented by other divisions within the Deutsche Bank Group. Such ESG scores also differ from other ratings and
rankings that have historically been applied in research reports published by Deutsche Bank AG. Further, such ESG scores do not represent a formal or official view of Deutsche
Bank AG. It should be noted that the decision to incorporate ESG factors into any investment strategy may inhibit the ability to participate in certain investment opportunities that
otherwise would be consistent with your investment objective and other principal investment strategies. The returns on a portfolio consisting primarily of sustainable investments
may be lower or higher than portfolios where ESG factors, exclusions, or other sustainability issues are not considered, and the investment opportunities available to such
portfolios may differ. Companies may not necessarily meet high performance standards on all aspects of ESG or sustainable investing issues; there is also no guarantee that any
company will meet expectations in connection with corporate responsibility, sustainability, and/or impact performance.

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Ryan, Weidner
Weidner, Yang March 2023 January 2025