Trump doubles steel and aluminium tariffs on Turkey as lira nosedives

Hard currency debt issued by Turkish banks suffered similar falls. To do that, they have to sell lira – worsening the rout.

Turkey’s ever combative President Recep Tayyip Erdogan vowed to not bow to economic pressure. He has urged the central bank to not raise interest rates. Gultekin hopes that some sort of compromise between Turkey and the U.S. can be reached, enabling Erdogan to have an “honourable exit” and come up with a substitute for the International Monetary Fund stabilisation programmes of previous crises.

Erdogan’s claim of a Western political plot against him sparked alarm in investors and prompted an acceleration in the currency sell-off. On Friday, he said the country had to take steps in answer “to those who have waged an economic war against us”. United States stocks were also rattled.

Experts, however, were split about Mr Trump’s tariffs decision with some fearing it could backfire on US-Turkish relations without helping Mr Brunson’s case.

The US on August 1 imposed financial sanctions on its North Atlantic Treaty Organisation ally, blocking Turkey’s ministers of justice and interior from doing business with Americans.

The Turkish lira fell around 16% against the United States dollar on the day, from $0.18 to $0.15 as of 3pm BST.

Turkey’s currency fell Friday after its economy was rattled by the United States’ move to slap the country with more tariffs. The “war” he is referencing is over the Turkish lira, which has plummeted this week.

Now at a new record low, Turkey’s currency has lost more than 40% this year. That makes a loan in dollars that much more expensive to repay. So the sudden fall raises the possibility of corporate bankruptcies or bank failures that could hurt the economy.

He also said increasing production, exports and employment was the best response to the country’s challenges.

Steel futures on Friday were up 1 percent at $907 per ton on the New York Mercantile Exchange, but are up 46 percent from $621 per ton a year ago.

Indeed, the turmoil in Turkey could ultimately touch overseas banks – especially those with large global or Wall Street operations – through a variety of channels. European officials also rely on a deal with Turkey to restrain migrant flows in return for aid. The White House said he had authorized them under asection of US trade law that allows for tariffs on nationalsecurity grounds.

Such factors could lead regulators to ask a bank like UniCredit – which is exposed to both Turkey and Russian Federation – to set aside more capital against those risks, Credit Suisse Group AG analysts led by Carlo Tommaselli said in a note.

In a tweet, he said he was imposing duties of 20 per cent on Turkish aluminium and 50 per cent on steel. He added, “Our relations with Turkey are not good at this time!”

Q: What is Erdogan proposing to do?

“Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks”.

“Turkey expects other member countries to abide by worldwide rules”, the country’s trade ministry said in a statement.

And it remains unclear if the bank would be willing to sharply lift rates, with analysts saying the nominally independent institution is under the influence of Erdogan, who wants low rates to keep growth humming.

“Whilst these three banks are likely secure enough to survive a major write-down in the region it does little to improve their earnings outlook over the short term and this is being reflected in the market’s repricing today”.