Turkey dou­bles tar­iffs on US cars, al­co­hol and to­bacco

Irish Independent - Business Week - - Front Page - Daren But­ler

TURKEY dou­bled tar­iffs on some US im­ports in­clud­ing al­co­hol, cars and to­bacco yes­ter­day in re­tal­i­a­tion for US “at­tacks on the econ­omy”, but the lira ral­lied fur­ther after cen­tral bank’s liq­uid­ity moves had the ef­fect of sup­port­ing the cur­rency.

Ankara acted amid in­creased ten­sion between the two NATO al­lies over Turkey’s de­ten­tion of a Chris­tian Amer­i­can pas­tor and other diplo­matic is­sues, which have helped send the lira tum­bling to record lows against the dol­lar.

The cur­rency has lost more than 40pc against the dol­lar this year, driven by wor­ries over Er­do­gan’s grow­ing in­flu­ence over the econ­omy and his re­peated calls for lower in­ter­est rates de­spite high in­fla­tion.

The re­bound of around 6pc yes­ter­day, briefly strength­en­ing to less than 6.0 against the dol­lar, came after the cen­tral bank squeezed lira liq­uid­ity in the mar­ket, ef­fec­tively push­ing up rates and sup­port­ing the cur­rency.

Op­ti­mism about bet­ter re­la­tions with the EU after a Turk­ish court re­leased two Greek sol­diers pend­ing trial and a bank­ing watch­dog’s step to limit for­eign ex­change swap trans­ac­tions have also helped the lira. “They are squeez­ing lira liq­uid­ity out of the sys­tem now and push­ing in­ter­est rates higher,” said Cris­tian Mag­gio, head of emerg­ing mar­kets strat­egy at TD Se­cu­ri­ties.

“Rates have gone up by 10pc. The cen­tral bank has not done this through a change in the bench­mark rates, but they are squeez­ing liq­uid­ity, so the re­sult is the same,” Mag­gio said.

The lira firmed as far as 5.75 against the dol­lar yes­ter­day and stood at 6.08 mid-morn­ing in a move ini­tially trig­gered by the Turk­ish court de­ci­sion on the Greek sol­diers who faced es­pi­onage charges.

A trea­sury desk trader at one bank said this showed re­la­tions with the EU could re­cover “while tense re­la­tions con­tinue with the USA”. The lira was also helped by a step from the bank­ing watch­dog BDDK, cut­ting the limit for Turk­ish banks’ forex swap, spot and for­ward trans­ac­tions with for­eign banks to 25pc of a bank’s equity.

“Re­mark­able turnaround,” Tim Ash, Bluebay As­set Man­age­ment se­nior emerg­ing mar­kets an­a­lyst wrote in a client note.

“They are killing off­shore lira liq­uid­ity to stop for­eign­ers short­ing the lira,” he said. The lira had al­ready re­bounded about 8pc on Tues­day on news of a planned con­fer­ence call to­day in which the fi­nance min­is­ter will seek to re­as­sure in­ter­na­tional in­vestors.

A de­cree signed by Pres­i­dent Tayyip Er­do­gan dou­bled Turk­ish tar­iffs on pas­sen­ger cars to 120pc, on al­co­holic drinks to 140pc and on leaf to­bacco to 60pc.

Tar­iffs were also dou­bled on goods such as cos­met­ics, rice and coal.

The du­ties were raised in re­sponse to the US ad­min­is­tra­tion’s “de­lib­er­ate at­tacks on our econ­omy,” vice Pres­i­dent Fuat Ok­tay wrote on Twit­ter. Last Fri­day, US Pres­i­dent Don­ald Trump said he had au­tho­rised higher tar­iffs on alu­minium and steel im­ports from Turkey.

The United States was the fourth-largest source of im­ports to Turkey last year, ac­count­ing for $12bn of im­ports, ac­cord­ing to IMF sta­tis­tics.

Turkey’s ex­ports to the United States last year amounted to $8.7bn, mak­ing it Turkey’s fifth-largest ex­port mar­ket.

Nato al­lies US and Turkey have been at log­ger­heads over a wide range of top­ics in­clud­ing di­verg­ing in­ter­ests in Syria, Ankara’s am­bi­tion to buy Rus­sian de­fence sys­tems and An­drew Brun­son, a pas­tor on trial in Turkey for ter­ror­ism charges.

Mr Trump has re­peat­edly asked for Mr Brun­son’s re­lease, while Ankara said the de­ci­sion was up to the court.

Yes­ter­day, a Turk­ish court in the Aegean prov­ince of Izmir, where Mr Brun­son is on trial, re­jected the pas­tor’s ap­peal to be re­leased from house ar­rest.

An up­per court had yet to rule on the ap­peal, his lawyer told Reuters.

Wash­ing­ton warned more eco­nomic pres­sures may be in store for Turkey if it re­fuses to re­lease Brun­son, a White House of­fi­cial said on Tues­day.

Er­do­gan has said Turkey is the tar­get of an eco­nomic war, and has made re­peated calls for Turks to sell their dol­lars and eu­ros to shore up the cur­rency.

On Tues­day, he said Turkey would boy­cott US elec­tronic prod­ucts. (Reuters)

Peo­ple line up at a cur­rency ex­change shop in Istanbul as Turkey’s lira plunged


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