Turkey is shaken by financial fears, Trump rattles it even further
ANKARA, Turkey — A financial shockwave ripped through Turkey on Friday, when its currency nosedived on concerns about its economic policies and a dispute with the U.S., which President Donald Trump stoked further with a promise to double tariffs on the NATO ally.
The lira tumbled 14 percent in one day, to 6.51 per dollar, a massive move for a currency that will make the Turkish poorer and further erode international investors’ confidence in the country.
The currency’s drop — 41 percent so far this year — is a gauge of fear over a country coming to terms with years of high debt, international concern over President Recep Tayyip Erdogan’s push to amass power, and a souring in relations with allies like the U.S.
The diplomatic dispute with the U.S. was one of the triggers that turned market jitters into a full-blown route this week.
Turkey has arrested an American pastor and put him on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago. The U.S. responded by slapping sanctions on Turkey and threatening more. The sides held talks in Washington this week but failed to resolve the spat, and Trump took advantage of Turkey’s turmoil on Friday to turn the screws on the country.
Trump tweeted that he had authorized the doubling of steel and aluminum tariffs “with respect to Turkey.” Trump said the tariffs on aluminum imports would be increased to 20 percent and those on steel to 50 percent as the Turkish lira “slides rapidly downward against our very strong Dollar!”
“Our relations with Turkey are not good at this time!” he wrote.
Trump made the 50 percent steel tariff official with a presidential proclamation Friday evening.
The United States is the biggest destination for Turkish steel exports with 11 percent of the Turkish export volume. The lira fell further after Trump’s tweet.
In what appears to be a diplomatic riposte, Turkey later said Erdogan had held a phone call with Russian President Vladimir Putin to discuss economic ties. It did not disclose details, but suggests Turkey might gravitate further away from its NATO allies toward cooperation with Russia, whose relations with the West are at their lowest since the Cold War.
Turkey’s woes have been aggravated by investor worries about the economic policies of Erdogan, who won a new term in office in June with sweeping new powers.
Erdogan has been putting pressure on the central bank to not raise interest rates in order to keep fueling economic growth. He claims higher rates lead to higher inflation — the opposite of what standard economic theory says.
Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency.