Higher US tariffs increase pressure on Turkish economy

Higher US tariffs increase pressure on Turkish economy

Higher US tariffs increase pressure on Turkish economy

U.S. President Donald Trump said on Friday he had authorised higher tariffs on imports from Turkey, imposing a 20 percent duty on aluminium and 50 percent one on steel, as tensions rose between the two North Atlantic Treaty Organisation allies over Ankara's detention of an evangelical pastor and other diplomatic issues.

President Trump has doubled U.S. tariffs on Turkish steel and aluminium, as the precipitous fall of the Turkish lira accelerates.

The White House said Mr Trump had authorised them under a section of United States trade law that allows for tariffs on national security grounds.

The United States is the biggest destination for Turkish steel exports with 11 per cent of the Turkish export volume.

The lira has always been falling on worries about Mr Erdogan's influence over monetary policy and worsening relations with the United States.

The US dollar surged to new 2018 highs in the early hours of Friday morning on a mixture of concerns over the currency situation in Turkey, consistent expectations on the performance of the US economy and the outlook that the United States should be better prepared to handle the negative headwinds from a trade war, in comparison to those economies that it targets.

The Turkish lira fell at least 13 percent Friday, as President Erdogan called for people to exchange their other forms of money to the lira.

Turkey's ever combative President Recep Tayyip Erdogan vowed to not bow to economic pressure.

But while Mr Erdogan - who vowed Turkey would win the "economic war" - favours lowering borrowing costs to fuel credit growth and economic expansion, others would rather see interest rates rise.

While Turkey and the United States are at odds over a host of issues, the most pressing disagreement has been over the detention of US citizens in Turkey, notably Christian pastor Andrew Brunson who is on trial on terrorism charges.

The US may also be stuck on Turkish demands to waive or minimise a treasury fine on Halkbank, a Turkish state bank involved in a court case over violating US sanctions on Iran.

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After inconclusive talks this week on solving the spat, Mr Trump took advantage of Turkey's turmoil to turn the screws on the country.

"When it comes to cornering Turkey to extract certain concessions that undermine our sovereign rights, it is a whole another story".

"Our relations with Turkey are not good at this time!".

Maizel recommends that investors stick with dollar-denominated issues, due to the volatility of emerging market currencies, such as the Turkish lira.

Turkish President Tayyip Erdogan leaves from a mosque in Bayburt, Friday.

The lira, which has lost a third of its value this year, fell on his comments and was trading at around 6.05 to the dollar after he spoke, almost 9 percent weaker on the day.

In the past, the Turkish authorities have always managed to contain problems by being willing to take aggressive action such as in January 2014, when the central bank hiked its overnight lending rate by 4pc at a midnight meeting.

Now, if none of that makes sense to you, don't worry: It shouldn't. "Don't heed them. Don't forget, if they have their dollars, we have our people, our God", Erdogan said.

The tensions with Washington have, for investors, underscored Turkey's authoritarian trajectory under Erdogan.

Albayrak, who formerly served as energy minister, on Friday announced what he has described as a "new economic model" for Turkey but he focused on macro-economic issues and steered well clear of tackling the currency crisis.

"This could be the most expensive pastor in world history", Sekulow said, referring to the harm being done to Turkey's economy.

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