Trump puts pressure on Turkey by doubling down on tariffs

Trump puts pressure on Turkey by doubling down on tariffs

President Recep Tayyip Erdogan vowed Saturday to defy U.S. "threats" over a detained pastor, showing no signs of concessions in a bitter row that has caused the Turkish lira to crash.

Reverberations spread through global markets, with European stock markets especially hit as investors took fright over banks' exposure to Turkey.

The 64-year-old also highlighted the major difficulty in battling the Kurdish insurgency which has full U.S. support for fighting Islamic State fighters in northern Syria.

The lira has lost more than 40 percent this year.

On August 10, Trump announced he had authorized the doubling of tariffs on steel and aluminum imports from Turkey.

The Turkish lira tumbled 16 per cent against the dollar on Friday.

President Recep Tayyip Erdogan said Washington would pay for challenging Turkey all for the sake of "petty calculations". While many of Turkey's challenges are specific to that country, there are certain characteristics - a heavy debt load following a prolonged, low USA interest-rate driven borrowing binge in dollars - broadly shared throughout emerging markets.

"President Erdogan's strengthened powers under the new presidential system have made it increasingly uncertain whether policymakers will be able to act to stabilize the economy", William Jackson, the chief emerging markets economist at Capital Economics in London, said.

Tariffs on Turkish aluminum are to be increased to 20 percent and steel tariffs are to be moved up to 50 percent, according to Trump.

When the lira crashed, Iran threatened Mr Trump and said that the "entire world would unite" and use "force" the USA to scrap the sanctions.

"Those who challenge a country like Turkey for the sake of petty calculations will pay a price both in our region and in their own politics", the Turkish leader said.

"We are gearing up for trade in national currencies with China, Russia, Iran, Ukraine, which account for the largest bilateral trade volume".

"The US runs the risk of losing Turkey as a whole".

Trump's decision to double tariffs on Turkey is another salvo in the growing dispute between the two North Atlantic Treaty Organisation allies.

The contagion of instability from Turkey into Europe may extend beyond the financial, should the country decide to or find itself no longer able to keep up with its end of the EU-Turkey agreement to stop the flow of Middle Eastern migrants across the Mediterranean into Greece, resulting in a second migrant crisis.

"If you have dollars, euros or gold under your pillow, go to banks to exchange them for Turkish lira".

He also repeated his call to Turks to sell their dollar and euro savings to shore up the lira.

Mr Trump has castigated Turkey for detaining American pastor Andrew Brunson, who is on trial for terrorism charges for allegedly associating with plotters of the failed 2016 coup against Mr Erdogan. Gulen denies the allegation.

Observers have noted how fighting for Mr Brunson's cause is likely to be popular with Mr Trump's evangelical base ahead of crucial mid-term elections this November.

Erdogan has blamed outside forces for trying to bring down Turkey's economy.