Donald Trump turns the screws on Turkey

Cornelia Mascio
Agosto 11, 2018

Despite pressure from markets and Donald Trump doubling tariffs on Turkish steel and aluminium imports, president Erdogan was defiant.

Trump tweeted he had authorized a 20 percent duty on aluminum and 50 percent one on steel.

This is double the level the president imposed on a range of countries earlier this year, including European Union member states.

To understand how all of these pieces fit together, we'll start with some basic facts about trade between the United States and Turkey.

Friday morning, President Trump tweeted about the situation with Turkey, announcing further tariffs and noting that relations between the USA and Turkey are "not good".

The lira, Trump noted on Twitter, "slides rapidly downward against our very strong Dollar!"

The lira has now lost over a third of its value against both the dollar and the euro this year, with the currency battered by both concerns over domestic economic policy and the political situation. It has fallen more than 46% in the past year. If it fell much further, it might push a lot of Turkish banks and businesses that had borrowed in dollars into bankruptcy - assuming they did not get bailed out first.

Exchange-rate volatility not only complicates loan repayments, it also drives inflation higher and erodes the value of existing loans in the local currency.

The slump is attributed to the tensions with the United States and concerns about President Recep Tayyip Erdogan's control of monetary policy.

Market analysts warn that Turkey's deteriorating economy could hurt other emerging economies. But some investors fear the Turkish economy is growing too quickly and could face problems. He has urged the central bank to not raise interest rates. His comments on interest rates - and his recent appointment of his son-in-law as finance minister - have heightened perceptions that the central bank is not independent.

Erdogan has blamed outside forces for trying to bring down Turkey's economy. He said this would be Turkey's response "to those who wage economic war against us".

"Our relations with Turkey are not good at this time!" he wrote.

United States investors shifted focus from strong corporate earnings to the rout in Europe, sending the major stock-market indexes lower. -Turkish relations is a dispute over an American clergyman who has been jailed in Turkey since December 2016.

Turkey has accused Andrew Craig Brunson of spying and "committing crimes on behalf of terror groups without being a member".

But Aykan Erdemir, of the Foundation for Defense of Democracies, said Mr Trump's tariffs announcement comes "at the worst possible time for Mr Erdogan" and fits with USA strategy to increase pressure on Ankara until Mr Brunson is released. Mr Erdogan held a phone conversation with Russian President Vladimir Putin immediately after the tariffs announcement, and Russian foreign minister Sergey Lavrov is expected in Turkey on Monday.

The new set of economic steps are aimed at securing an economic growth of 3-4 percent in 2019, and decreasing the inflation rate to single digits, the ministry said in a press release on August 9. Mario Ritter was the editor. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

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