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

Mae Love
August 13, 2018

"Investors are clearly concerned that Turkey's government won't act (or allow the central bank to act) to shore up the currency, and fears are mounting that this could result in a crisis in Turkey's banking sector", wrote William Jackson, chief emerging markets economist for Capital Economics, in a client note.

Turkey's trade ministry said the tariffs were against World Trade Organisation rules.

Turkish President Recep Tayyip Erdogan on Saturday branded interest rates a "tool of exploitation" which should be kept as low as possible.

"This is clearly an attack against the Turkish economy", he said.

The Turkish currency has been a casualty of a deepening crisis spurred by the administration's growth-at-all-costs agenda and a worsening spat with the USA, which sanctioned Turkey over the detention of an American priest.

Turkish President Recep Tayyip Erdogan speaks during a press conference at the Presidential Complex in Ankara where he announced the upcoming electoral timetable on April 18, 2018.President Recep Tayyip Erdogan called snap elections in Turkey for June 24, bringing the polls forward by over a year-and-a-half to sharply accelerate the transition to a new presidential system.

He has also dismissed any suggestions that Turkey might intervene in dollar-denominated bank accounts, saying any seizure or conversion of those deposits into lira was out of the question.

Mr. Erdogan's remarks also knocked back investors' expectations of a rate hike from the central bank.

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It said it would support steel and aluminium exporters on all worldwide platforms, and the U.S. remained an important trade partner.

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The dispute between the two North Atlantic Treaty Organisation allies - which reached new intensity over the detention of an American pastor in Turkey - has hammered the lira and also raised questions over the future partnership between Washington and Ankara.

Speaking to supporters in the Black Sea coastal city of Trabzon, Erdogan revealed details of negotiations held last week between the two countries, saying Washington had threatened sanctions if Turkey refused to release the pastor.

He reiterated his call on citizens to change US Dollars and Euros for the Turkish Lira in the face of a sharp plunge his country's currency witnessed in financial markets this week.

"I am specifically addressing our manufacturers: Do not rush to the banks to buy dollars".

US President Donald Trump said Friday he had doubled tariffs on steel and aluminium from Turkey, adding to pressure on its troubled economy amid a diplomatic row with Washington over the detention of a pastor.

Last week, a Turkish delegation went to Washington and met American counterparts but there was no breakthrough. "We have seen your play and we challenge you".

In the last two years, the Turkish government has increasingly used the detainment of people with USA or dual citizenship to try to force the United States to give into its demands.

A White House official said they did not set a deadline for Brunson, adding that he was expected home a long time ago. "You should know that to keep this nation standing is. also the manufacturers" duty".

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