According to news from the Chasing Wind Trading Platform, on May 22, Deutsche Bank's latest research report pointed out that the real exchange rate of the US dollar needs to depreciate by 40% to bring the US trade deficit to zero, and this goal cannot be achieved solely through tariff policies.
Deutsche Bank's Chief Economist Peter Hooper analyzed in the report that over the past 15 years, the real exchange rate of the US dollar has appreciated by about 40%, a trend driven by US fiscal expansion, monetary policy cycles, and changes in overseas savings behavior. A reversal of the real exchange rate of the US dollar over the past 15 years is necessary to eliminate the trade deficit.
<blockquote>
If the average real exchange rate appreciation of 40% over the past 15 years were to reverse, it could likely restore the deficit to a zero balance, but the policy measures required may far exceed the simple implementation of tariffs.
</blockquote>
Deutsche Bank's research report shows that the root cause of the long-term trade deficit in the US is highly correlated with fluctuations in the real exchange rate of the US dollar.
<blockquote>
For a long time, the most stable driving factor affecting the US external deficit has been the fluctuations in the real exchange rate of the US dollar, which stem from fundamental changes in fiscal and monetary policy, as well as changes in the savings behavior of the overseas private sector and government.
</blockquote>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/9cf3e3b9-90d0-4067-bbce-b1321eb33ba1.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/9cf3e3b9-90d0-4067-bbce-b1321eb33ba1.png"/>
<h2>Side Effects of Tariff Policies: Limited Effects and Painful Costs</h2>
Deutsche Bank stated that under two conditions, tariffs do have the potential to reduce the trade deficit: first, trade partner countries reduce retaliatory measures; second, the US dollar continues its depreciation trend, rather than the usual appreciation that accompanies tariffs.
However, Deutsche Bank warned that the economic impact of tariff policies on the US—rising prices and slowing economic growth—will be painful. The rising prices of imported goods in the US will directly increase inflationary pressures, while retaliatory measures from trade partners may lead to a decline in US exports.
Therefore, to bring the deficit back to zero, it is clear that relying solely on tariff measures cannot achieve this goal.
Hooper predicts that as the price pressures triggered by tariffs further ferment, public opinion may force a policy shift.
<blockquote>
When ordinary households discover the direct correlation between soaring prices of daily necessities and job losses, the current policy will face greater challenges.
</blockquote>
<h2>US Dollar Index Enters Downward Channel, Morgan Stanley: Continued Depreciation in the Second Half of the Year</h2>
Recently, the US dollar index has entered a downward channel, continuously falling to around the 99 level, but this is still far from the 40% decline proposed by Deutsche Bank.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/afa12223-61d3-4378-8587-61889fdf91f0.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/afa12223-61d3-4378-8587-61889fdf91f0.png"/>
Morgan Stanley stated in its latest mid-term strategy outlook report that it expects the US dollar to continue to depreciate in the second half of the year.
Morgan Stanley believes that the easing of tariff threats reduces the likelihood of economic recession, while accompanied by substantial monetary easing and regulatory relaxation, it expects the S&amp;P 500 index to rise by 9% by the second quarter of next year, and the yield on 10-year US Treasury bonds to fall to 3.45%
It is expected that the US dollar index will depreciate by 9% to 91 by mid-2026, as two core driving forces behind the strong dollar era are disappearing: the growth advantage of the US relative to other G10 economies and the yield advantage will significantly weaken.
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Deutsche Bank warns that the dollar needs to depreciate by 40% to eliminate the trade deficit, and that tariff measures have limited effects and may also trigger pain from rising prices and economic slowdown

- Deutsche Bank's report indicates that the U.S. dollar must depreciate by 40% to eliminate the trade deficit, a goal unlikely to be achieved solely through tariff policies.  
- Chief economist Peter Hooper notes that the dollar's real exchange rate has appreciated by about 40% over the past 15 years, driven by fiscal expansion and changes in savings behavior.  
- The report warns that while tariffs could reduce the trade deficit under certain conditions, they may lead to rising prices and economic slowdown, making it clear that tariffs alone cannot achieve a zero deficit.

How much does the US dollar need to depreciate to eliminate the trade deficit? Deutsche Bank: 40%!