U.S. President Donald Trump ramped up his attack on Turkey by raising steel and aluminium tariffs to 50 percent and 20 percent respectively. “Our relations with Turkey are not good at this time!”
With US sanctions and tariffs hitting Turkey this month for its refusal to release an American pastor, the relationship between the two North Atlantic Treaty Organisation allies is crumbling amid fears on the regional impact.
Pressure on Turkey is also coming from US Congress that moved late last month to block further F-35 deliveries to Turkey until it cancels the S-400 defence system deal with Russian Federation and Brunson is released.
Turkey’s economy is regarded as fragile because of its high debt, which the global Monetary Fund estimates is 50 percent of its gross domestic product.
President Donald Trump announced Friday that he plans to double steel and aluminum tariffs on Turkey – prompting the lira to plunge 20 percent – amid heightened tensions between the two North Atlantic Treaty Organisation allies.
The lira tumbled about 10 per cent on Friday to another record low as investors worry about Erdogan’s unorthodox economic policies and USA sanctions.
The Turkish president called on Turks to exchange dollars, euros and gold for Turkish lira. “This is a national, domestic battle”, he said.
The dollar rose as exposure to Turkey could impact European banks and spark a domino effect throughout Europe as people begin to pull out of those banks and into the USA, said Gregan Anderson, macroeconomic strategist at brokerage Bulltick LLC.
The increase in tariffs is considered a blow to the value of Turkey’s lira, which reportedly fell further after the president’s announcement. “Don’t worry”, Erdogan told a crowd in the northeastern city of Bayburt.
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.
Turkey’s sovereign dollar-denominated bonds tumbled with many issues trading at record lows. He claims higher rates lead to higher inflation – the opposite of what standard economic theory says.
The fall has come as Turkish President Recep Tayyip Erdogan has moved to take greater control of monetary policy. Rate increases are the central bank’s main tool to support the currency and fight inflation.
“You will not make money at the expense of Turkish people”. Erdogan’s speech caused the value of the lira to drop even further.
Berat Albayrak, the Treasury minister and Mr Erdogan’s son-in-law, is due to announce a “new economic model” for Turkey…
The trouble is that for all of Albayrak’s talk of Central Bank independence, Erdogan is fiercely opposed to any interest rate hikes, which are widely seen as necessary to stem the bleeding. “On some days, I end the day with a loss”.