U.S. tariffs hike adds to Turkey’s economic problems

Aluminum will now be 20% and Steel 50%.

According to figures from the Turkish Government, for the period of 2002 to October 2017, Turkish direct investments in the United States reached $3.7 billion while USA investments in Turkey amounted to $11.1 billion, second only to the Netherlands’ 21.6 billion. One U.S. dollar traded at 5.96 lira by 2:15 p.m.

The lira was trading at 6.47 to the dollar at 1230 IST, a loss on the day of 16.6 percent. Since the start of the year, it is now down a full 41 percent against the dollar. The lira fell further as Erdogan spoke.

Markets are deeply concerned over the direction of domestic economic policy under Erdogan with inflation at almost 16 percent but the central bank reluctant to raise rates in response.

Also on Friday, relations between the United States and Turkey have worsened over the fundamentalist Muslim-majority country’s detention of American pastor Andrew Brunson, who was arrested by authorities during a post-military coup attempt in 2016. The U.S. responded by slapping sanctions on Turkey and threatening more.

He said high foreign exchange rates were being used as a weapon against Turkey.

His characteristic defiance has further unnerved investors. But experts argue that the central bank should instead raise interest rates to ease inflation and to support the currency. “This will be my nation’s response to those who have declared an economic war”, Erdogan said during the rally.

Treasury and Finance Minister Berat Albayrak has vowed to execute Turkey’s new economic model together with “all national and worldwide stakeholders”, while stressing that a “decisive” approach and the Central Bank’s independence would be maintained.

He wrote and Washington’s unilateral actions against Turkey undermine American interests and force Ankara to search for new allies. In the past, Trump has threatened to impose trade barriers on countries that deliberately push down the value of their currencies, so as to make their goods cheaper for American consumers (and thus, more competitive than the wares of USA manufacturers). The U.S. exported $9.75 billion worth of goods-mostly cotton, scrap iron, steel, civilian aircraft parts, coal, and petroleum gases-to Turkey, and imported $9.42 billion worth of goods from them.

Brunson’s charges include spying for the PKK – listed as a terrorist group by both the United States and Turkey – and Fetullah Terrorist Organization (FETO). He still faces a sentence of up to 35 years if he is convicted at his ongoing trial.

Some US officials say Turkey is holding Brunson as a bargaining chip after an executive at Turkey’s state-owned Halkbank was convicted and imprisoned in the United States in May for helping Iran evade US sanctions.

Andrew Craig Brunson, an evangelical pastor from Black Mountain, North Carolina, arrives at his house in Izmir, Turkey, Wednesday, July 25, 2018.

Turkey’s woes have been aggravated by investor worries about the economic policies of Erdogan, who won a new term in office in June with sweeping new powers.

Asli Aydintasbas, senior fellow with the European Council on Foreign Relations, stated that Erdogan’s speech “was clearly defiant”, but Turkey’s economic situation continues to appear ever more dire.

On Friday, Mr Erdogan also held a telephone call with Russian President Vladimir Putin, with the pair discussing economic ties between their two countries.

Bryan Lynn wrote this story for VOA Learning English, based on reports from Reuters, the Associated Press and Agence France-Presse.