To paraphrase Michael Every’s earlier take, “will today go down in history, marking the end of one era and the beginning of another?”
That’s the question asked by DB’s Jim Reid who notes that only time, and subsequent negotiations, will tell. However, as the DB credit strategist notes, “tariff announcements today could well take us into uncharted territory.”
According to Deutsche Bank’s calculations, the previously announced measures already bring the US to a 12% average tariff rate, the highest since World War II.
And then, today’s announcement could increase this to 18%, and potentially even higher if the reported near-universal 20% tariff option is implemented.
This would approach the levels seen in the early 1930s after the Smoot-Hawley Tariff Act, though likely remaining below the very protectionist rates of the early 20th century.
This earlier period has been cited by Trump and Lutnick as a golden era for the US (presumably this excludes the Great Depression that followed the Smoot Hawley protectionism). Reid’s points out that the recent Lutnick and Bessent podcasts highlight Lutnick’s emphasis on tariffs as the foundation the US economy was built on, noting the absence of income tax until 1913 during what he considers the nation’s wealthiest period.
He argues that post-World War II tariff reductions were a strategic move to aid global reconstruction, with the understanding that other countries would maintain higher tariffs.
However, he now believes this imbalance has persisted too long, requiring a new approach.
In one respect, we’ve already returned to McKinley-era levels. Because trade represents a larger share of the economy today, Reid notes that tariff revenue as a percentage of GDP is already set to slightly exceed 1%, based on the announced tariffs on China (20%), Canada and Mexico (partial 25%), and steel, aluminum, and autos (25%). This puts us back in McKinley territory, and we’re likely to surpass it today (chart right below).
As such, Reid concludes that “any announcement today will be subject to negotiation, but the starting point will likely be era-defining.”
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