Turkey in­creases tar­iffs on some U.S. goods, es­ca­lat­ing feud

The Western Star - - BUSINESS - BY SUZAN FRASER

Turkey said Wed­nes­day it is in­creas­ing tar­iffs on im­ports of cer­tain U.S. prod­ucts, in­clud­ing rice, cars, al­co­hol and coal - es­ca­lat­ing a feud with the United States that has helped trig­ger a cur­rency cri­sis .

The Turk­ish gov­ern­ment said tar­iffs on Amer­i­can cars will be dou­bled to 120 per cent while those on al­co­holic drinks will be hiked by the same rate to 140 per cent. Over­all, the du­ties will amount to $533 mil­lion, a rel­a­tively small sum that is un­likely to hurt U.S. com­pa­nies much and ap­pears meant in­stead to make a po­lit­i­cal point.

Vice-Pres­i­dent Fuat Ok­tay said on Twit­ter that the tar­iffs on cer­tain prod­ucts were in­creased “within the frame­work of the prin­ci­ple of rec­i­proc­ity in re­tal­i­a­tion for the de­lib­er­ate eco­nomic at­tacks by the United States.”

The tar­iffs come a day af­ter Pres­i­dent Re­cep Tayyip Er­do­gan said Turkey would boy­cott U.S. elec­tronic goods, sin­gling out iPhones. He sug­gested Turks would buy lo­cal or Korean phones in­stead, though it was un­clear how the boy­cott would be en­forced or en­cour­aged. Ap­ple has 22 per cent of the smart­phone mar­ket in Turkey, where 11.4 mil­lion units were sold last year, ac­cord­ing to Ra­mazan Yavuz, re­search man­ager at IDC con­sul­tancy com­pany.

Although pref­er­ence for Ap­ple prod­ucts is strong, their al­ready high prices are curb­ing de­mand, Yavuz said adding that the boy­cott “is ex­pected to re­duce Ap­ple’s per­for­mance in the coun­try in the up­com­ing quar­ters.”

The Turk­ish lira has dropped to record lows in re­cent weeks, hav­ing fallen some 42 per cent so far this year. It re­cov­ered a bit, by 4 per cent to around 6.12 lira per dol­lar Wed­nes­day, af­ter the gov­ern­ment took steps to shore up the cur­rency by re­duc­ing the daily limit in bank for­eign cur­rency swap trans­ac­tions.

Also help­ing was Turkey’s de­ci­sion to re­lease two Greek sol­diers from prison on Tues­day, in­creas­ing prospects for im­proved re­la­tions with the Eu­ro­pean Union.

Pres­i­den­tial spokesman Ibrahim Kalin claimed Wed­nes­day that a se­ries of mea­sures aimed at shoring up the Turk­ish cur­rency were tak­ing ef­fect and that he ex­pected the lira to strengthen fur­ther.

“We pre­dict that mea­sures that our in­sti­tu­tions will con­tinue to take will re­sult in an even stronger nor­mal­iza­tion of the Turk­ish econ­omy,” Kalin said.

But fun­da­men­tal con­cerns about the econ­omy per­sist, ex­perts say.

In­vestors are wor­ried that about Er­do­gan’s con­trol over the cen­tral bank and his pres­sure to keep it from rais­ing in­ter­est rates. Higher rates would slow eco­nomic growth, which he wants to egg on, but are ur­gently needed to sup­port the cur­rency and tame in­fla­tion, ex­perts say.

The cur­rency drop is par­tic­u­larly painful for Turkey be­cause it has ac­cu­mu­lated a high debt in for­eign cur­ren­cies.

At­ten­tion will turn Thurs­day to an ad­dress by the finance minister to for­eign in­vestors for clues on any change in eco­nomic pol­icy.

Er­do­gan has re­acted to the fi­nan­cial in­sta­bil­ity by blam­ing for­eign pow­ers, in par­tic­u­larly the United States, a long­time NATO ally, which he says is wag­ing an “eco­nomic war” as part of a plot to harm Turkey.

AP PHOTO

Peo­ple walk in a shop­ping mall in Ankara, Turkey, Wed­nes­day.

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