late 14c., used first of Germans generally, after c.1600 of Hollanders, from Middle Dutch duutsch, from Old High German duit-isc, corresponding to Old English þeodisc "belonging to the people," used especially of the common language of Germanic people, from þeod "people, race, nation," from Proto-Germanic *theudo "popular, national" (see Teutonic), from PIE root *teuta- "people" (cf. Old Irish tuoth "people," Old Lithuanian tauta "people," Old Prussian tauto "country," Oscan touto "community").
As a language name, first recorded as Latin theodice, 786 C.E. in correspondence between Charlemagne's court and the Pope, in reference to a synodical conference in Mercia; thus it refers to Old English. First reference to the German language (as opposed to a Germanic one) is two years later. The sense was extended from the language to the people who spoke it (in German, Diutisklant, ancestor of Deutschland, was in use by 13c.).
Sense narrowed to "of the Netherlands" in 17c., after they became a united, independent state and the focus of English attention and rivalry. In Holland, Duits (formerly duitsch) is used of the people of Germany. The Middle English sense survives in Pennsylvania Dutch, name of the people who immigrated from the Rhineland and Switzerland.
Since c.1600, Dutch (adj.) has been a "pejorative label pinned by English speakers on almost anything they regard as inferior, irregular, or contrary to 'normal' (i.e., their own) practice" [Rawson]. E.g. Dutch treat (1887), Dutch uncle (1838), etc. -- probably exceeded in such usage only by Indian and Irish -- reflecting first British commercial and military rivalry and later heavy German immigration to U.S.
Dutch oven is from 1769; OED lists it among the words describing things from Holland, but perhaps it is here used in the slighting sense. Dutch elm disease (1927) so called because it was first discovered in Holland (caused by fungus Ceratocystis ulmi).