Turkey emerges as economic flash point
Markets quake as country’s currency plunges amid political turmoil, inflation, Trump fight
Turkey’s currency plunged Friday — accelerated by a hostile tweet from President Donald Trump — causing financial markets to tremble and showing that the country is as much a risk to the world economy as it is a geopolitical flashpoint.
Internal political turmoil, soaring inflation and a burgeoning conflict with Trump over a jailed American pastor combined to destroy confidence in the Turkish lira, which lost 20 percent of its value against the dollar at one point Friday, dropping it to a record low.
Turkey’s economy is only the 17th largest in the world, but its problems are worsening as Trump’s trade war is rattling global commerce, damaging longtime alliances and threatening economic growth
There is also widespread fear among foreign investors that the populist, authoritarian government of President Recep Tayyip Erdogan is pursuing irresponsible economic policies while undercutting the independence of the central bank. That, analysts fear, is preventing the country from taking the necessary steps to put the economy on a more stable footing.
Trump aggravated an already dire situation in Turkey when he said that he would double tariffs on imported Turkish steel to 50 percent and on aluminum to 20 worldwide. percent. The move seemed to be in retaliation for Turkey’s refusal to release an American pastor, Andrew Brunson, who was swept up in a crackdown after a failed coup attempt in 2016.
The move effectively priced Turkish steel out of the U.S. market, which accounting for 13 percent of Turkey’s steel exports.
“Our relations with Turkey are not good at this time!” Trump wrote.
Trump’s hostility toward a NATO ally increased the risk that Turkey’s problems could destabilize economies well beyond the region.
The plunge in the lira raised doubts about Asian and European banks that have invested in the country, and it contributed to declines in stock markets around the world.
On Friday, a dollar bought more than 6.8 lira, easily a record.
The sharp decline of the lira, and worries over the wider consequences of Turkey’s economic turmoil, helped drive the main stock indexes in Tokyo, Frankfurt and Paris more than 1 percent lower. The selling extended to the United States, where stock benchmarks were down about half a percent.