Turkey's floundering economy exacerbated by Trump tariffs

Turkey's floundering economy exacerbated by Trump tariffs

Putting a 50 percent tariff on a foreign country's steel exports isn't the most conventional way to secure an imprisoned American's relief. Import taxes for aluminum will be 20 percent.

"If you have dollars, euros or gold under your pillow, go to banks to exchange them for the Turkish lira". Relations between the United States and Turkey have been weakening for several reasons.

President Trump ordered a doubling of US tariffs on steel and aluminum imports from Turkey Friday, escalating a diplomatic spat with a key North Atlantic Treaty Organisation ally.

The lira lost 12pc against the dollar on Friday following an escalation of the tensions between Turkey and America. Earlier, it had crashed some 12 percent through the 6.00 level for the first time in history, trading at one point at more than 6.20 lira per dollar.

Investors piled into "safe" government debt, with German yields hitting three-week lows and the yield on the benchmark USA 10-year Treasury note falling to 2.88822 percent.

Coupled with an inflation rate of almost 16 percent, that could cause a lot of damage to the local economy.

Turkey on Friday blasted the Greek defense minister over his remarks against President Recep Tayyip Erdogan on the detention of two Greek soldiers in Turkey. If Turkey's economy crumbles more migrants could be headed to the European Union, making Turkey a political and economic crisis for the region. But some investors fear the Turkish economy is growing too quickly and could face problems. The lack of central-bank action to support the currency is also spooking investors and Erdogan's previous comment that interest rates are the "mother and father of all evil" hasn't helped.

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

While the International Monetary Fund has a history of lending a hand to Turkey, Erdogan is wary of the organization, creating barriers to a bailout. "We will not lose the economic war", state-run TRT Haber television quoted Erdogan as saying. "Making a speech like Albayrak's in the midst of a currency free fall without a single concrete measure shows utter lack of comprehension about what's happening and what's required", tweeted Harvard economist Dani Rodrik.

"Before it is too late, Washington must give up the misguided notion that our relationship can be asymmetrical and come to terms with the fact that Turkey has alternatives", he said.

The diplomatic dispute with the USA was one of the triggers that turned market jitters into a full-blown route this week.

Ankara wants the United States to extradite Fethullah Gulen, a Pennsylvania-based cleric who Turkish authorities say masterminded the 2016 coup attempt in which 250 people were killed.

The arrest of U.S. pastor Brunson since October 2016 has soured already delicate relations with Washington.

Last week, the United States imposed sanctions on Turkey's justice minister and interior minister for not releasing USA pastor Andrew Brunson.

Washington and Ankara have been at odds over a wide range of topics - from diverging interests in Syria to Turkey's ambition to buy Russian defence systems, and the case of evangelical United States pastor Andrew Brunson.

Erdogan said Turkey is not afraid of outside "threats". "Relations with countries who behave like this have reached a point beyond salvaging".