Donald Trump Authorizes More Steel and Aluminum Tariffs on Turkey

Donald Trump Authorizes More Steel and Aluminum Tariffs on Turkey

Donald Trump Authorizes More Steel and Aluminum Tariffs on Turkey

Trump announced the doubling of aluminum and steel tariffs in a tweet Friday, citing bilateral strains.

The lira, he noted on Twitter, "slides rapidly downward against our very strong Dollar!"

"At a time when evil continues to lurk around the world, unilateral actions against Turkey by the United States, our ally of decades, will only serve to undermine American interests and security", Erdogan said in the article.

Turkey remains at loggerheads with the United States in one of the worst spats between the two North Atlantic Treaty Organisation allies in years over the detention for the last two years of American pastor Andrew Brunson and a host of other issues. That caused a further drop in the lira.

US President Donald J. Trump and Turkeys President Recep Tayyip Erdogan (R) arrive for a family picture of Nato Summit in Brussels, Belgium, 11 July 2018.

"Unless the United States starts respecting Turkey's sovereignty and proves that it understands the dangers that our nation faces, our partnership could be in jeopardy", the Turkish president stated.

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

'This is a national, domestic battle.

All decisions about the way forward rest with Erdogan, and thus far, he seems undaunted. "We think that Erdogan needs to act now if he does not want Turkey to develop into a mini-Venezuela (worst case scenario)".

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Trump's tweet sent the already-depreciating Turkish lira into free fall, and appeared to bring other developing market currencies - and the euro - down with it.

The lira, which has lost more than 40 per cent this year, hit a new record low after Trump announced he would punish Ankara in a wide-ranging dispute.

As the currency weakens, it can make foreign investors pull their money out of Turkish stocks and bonds as their lira investments lose value.

"The Turks can export to many other countries, but with a weak lira, their products become cheaper to buy". All week, the lira has been under pressure, which accelerated with the failure of diplomatic talks in Washington this week. "It just shows the importance of the evangelical vote in the U.S.as it heads to midterms". The economic options include a central bank intervention by raising interest rates, although this would have a temporary effect, and Erdogan is famously hesitant to raise rates.

Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency.

"Don't forget, if they have their dollars, we have our people, our God", he said. "This will be the response to those who have declared an economic war". "Don't worry", Erdogan told a crowd in the northeastern city of Bayburt.

Turkey has had this sort of experience - a disastrous currency collapse shrinking its economy and impoverishing its citizens - several times before, most recently in February 2001.

New Finance Minister Berat Albayrak - Erdogan's son-in-law - rolled out the government's new economic plan on Friday, promising central bank independence and tighter budget discipline, but giving few details to reassure investors. 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.

"With EMEA a source of geopolitical risk, we think it will be hard for the ZAR to also stabilise - in effect the Rand's source of market risk has shifted from a weaker CNY to a weaker TRY and RUB", says foreign exchange strategist Viraj Patel with ING Bank N.V.

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