Trump vows to double steel and aluminum tariffs on Turkey

11 August, 2018, 13:55 | Author: Salvatore Jensen

US President Donald Trump is doubling tariffs imposed on Turkish steel and aluminum, insisting that the relationship between the two countries is 'not good'.

President Donald Trump said in a tweet Friday that he would hit Turkey with additional tariffs, as their national currency continues to drop.

Germany's exporter-heavy DAX .GDAXI index fell 2 percent, underperforming the broader market, while Milan was the hardest-hit major European index and lost 2.5 percent, its lowest level since July past year.

In a tweet, Mr Trump said the currency was weak against "our very strong dollar", adding that "US relations with Turkey are not good at this time".

In any case, economists warn that with the row with the United States injected into the mix, it will take far more than an increase in interest rates to reverse the downward trajectory of Turkey's once robust economy.

Turkey exported $1.04 billion (€0.91 billion) worth of steel and $60 billion worth of aluminum to the U.S. in 2017, according to the Hurriyet newspaper.

The lira fell as low as 6.75 to the dollar, down a whopping 14 percent on the day and 41 percent since the start of the year as investors worry about the country's economic policies and a dispute with the United States that has led to sanctions and new tariffs.

The lira sell-off deepened concern over whether over-indebted Turkish companies will be able to pay back loans taken out in euros and dollars after years of overseas borrowing to fund a construction boom under Erdogan.

Turkey's President Recep Tayyip Erdogan announces plan of action for the first 100 days of his new presidency, in Ankara, Turkey, Friday, Aug. 3, 2018.

He does have an understandable reason: Turkey has been holding an American pastor captive for 21 months, on grounds that the preacher was involved in the failed coup attempt against Turkish president Recep Tayyip Erdogan in 2016.

Erdogan appealed to a crowd in the city of Bayburt to exchange dollars and gold for Turkish lira to prop up the plunging currency. While it was true USA sanctions on a few top Turkish officials over an American pastor being detained had put more pressure on the lira this past week, this was far from the main reason their currency has been falling so fast. Trump and Vice President Mike Pence threatened on July 26 to impose sanctions on Turkey if the pastor is not set free and allowed to return to the United States. The Nasdaq composite was down more than 0.8 percent as technology stocks also dropped. Rate increases are the central bank's main tool to support the currency and fight inflation. "Turkey is an important strategic partner militarily and economically".




Then there are Turkey's worsening relations with the US.

The value of Turkey's currency has nosedived since January and has lost more than 34% of its value against the dollar.

The currency's drop - 40% so far this year - has become a gauge of fear over a country facing the fallout of years of debt-fuelled growth, worldwide concern over President Recep Tayyip Erdogan's push to amass power, and a souring in relations with allies like the US.

The Lira has plunged 66% since the start of the year, pushing up the cost of goods for Turkish people and shaking worldwide investors' confidence in the country.

The sudden announcement turned a run on the Turkish lira into a rout; it crashed more than 18 percent to a new record low against the dollar.

Meanwhile, new Treasury and Finance Minister Berat Albayrak, also the president's son-in-law, previewed a new economic program for the country.

There are more than a dozen United States energy pipelines on the drawing board, some of which are still seeking financing.

"At the same time, the new US sanctions against Russian Federation have unleashed concern in the German economy", he added.

The tensions with Washington have, for investors, underscored Turkey's authoritarian trajectory under Erdogan.

In June, the U.S. Senate passed a bill prohibiting Turkey from buying F-35 fighter jets because of Brunson's imprisonment and Turkey's purchase of Russia's S-400 air defense system.

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