Trump vows to double steel and aluminum tariffs on Turkey

Eileen GuzmanAug 11, 2018

The lira tumbled 14 per cent in one day, to 6.51 per dollar, a massive move for a currency that will make the Turkish poorer and further erode worldwide investors' confidence in the country.

A statement from the White House confirmed the president's decision to pool reporters.

The Washington Post newspaper said the USA administration was doing everything to strengthen its hand in the Brunson case, but the decision would do nothing but cause more problems for bilateral relations. All week, the lira has been under pressure, which accelerated with the failure of diplomatic talks in Washington this week.

"One area we are more concerned about is contagion into the European market via the banking sector".

"Our strongly-held negative view on Turkey remains intact and we're still negative on the lira, even here".

Turkish President Tayyip Erdogan told a rally Friday that his country would not yield to what he called bullying and blackmail.

The currency has fallen more than 35 percent this year after losing almost a quarter of its value in 2017.

He also urged Trump to recognize the 1915 Turkish slaughter and exile of 1.5 million Armenians as a genocide, which USA presidents have declined to do for decades. "The US should not forget that it could lose a strong and honest partner like Turkey if it does not change its attitude", he was quoted as saying by Hurriyet daily.

Some economists have suggested that capital controls may be imposed; these are limits on the money that can move in and out of a country.

The Turkish president took aim at the United States in his address, claiming "some countries have engaged in behaviour that protects coup plotters and knows no laws or justice". "Relations with countries who behave like this have reached a point beyond salvaging".

Turkey's currency, the lira, has hit record lows, creating a headache for the country's president and pushing up prices on everyday items. That drained investor confidence in the central bank, leading to a further sell-off of the currency. The lack of central-bank action to support the currency is also spooking investors and Erdogan's previous comment that interest rates are the "mother and father of all evil" hasn't helped.

He urged Turkish citizens to immediately exchange their gold and dollars for lira.

If there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks. Companies were "being unfairly punished for participating in worldwide trade", she said.

The external value of the lira is not a prime concern of Mr Erdogan's core supporters, many of whom have no plans for foreign holidays and readily accept government rhetoric that economic problems are caused by outsiders seeking to weaken Turkey. He seems to see Turkey's collapsing currency not as an existential threat to their economy they are trying to forestall, but rather as something they actively want to try to make their exports more competitive.

The Turkish president his indicated possible support from Beijing and Moscow, but analysts are skeptical, given the scale of support the Turkish economy needs.

One of the triggers of the turmoil has been a standoff with the US over a detained American pastor that Turkey, a North Atlantic Treaty Organisation ally, has put on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago.

"There are historical and geopolitical reasons for limits with relations with Moscow, limits I think we've reached", said worldwide relations expert Soli Ozel of Istanbul's Kadir Has University.

The CDS surge shows investors are betting Turkey will now have more trouble paying its debt and is a good barometer for investor fears who now rank Turkey more risky than Greece. "It may be not the best, but it is an option".

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