Turkish Lira Falls As Trump Doubles Metals Tariffs
- Author: Wendy Palmer Aug 14, 2018,
Aug 14, 2018, 0:27
The moves stem from Trump's frustration over detained American pastor Andrew Brunson held by Turkey.
Turkey has vowed to retaliate, but its currency has steadily weakened, removing some of the bite of the tariffs by making Turkish goods cheaper for US consumers.
The lira briefly fell as much as 14.6 per cent - its biggest one-day drop since early 2001 - before paring losses.
The president, who says a shadowy "interest rate lobby" and Western credit ratings agencies are attempting to bring down Turkey's economy, appealed to his countrymen's patriotism.
The tariff move effectively priced Turkish steel out of the USA market, which accounts for 13 percent of Turkey's steel exports.
"Nevertheless, we implore President Trump to return to the negotiating table - this can and should be resolved through dialogue and cooperation", he added.
Trump and Secretary of State Mike Pompeo have repeatedly called for his release, while Erdogan has said the USA should respect Turkey's judicial process.
In a tweet, Foreign Ministry Spokesman Hami Aksoy said President Donald Trump's decision, which also violates the rules of World Trade Organization, "cannot be associated with seriousness expected from a state".
"If they [U.S. manufacturers] are importing from Turkey and they rely on them, then tariffs are going to make it more expensive for them by raising their own costs", said William Jackson, chief emerging markets economist at London-based Capital Economics.
"Turkey expects other member countries to abide by worldwide rules", the ministry said in a statement, adding that it would support steel and aluminum exporters in all global platforms. Erdogan claims higher rates lead to higher inflation - the opposite of what standard economic theory says.
As with the financial crisis set off by Greece in 2010, Friday's events were the latest example of how troubles in a nation with a midsize economy but world-class problems could threaten financial stability further afield.
Mr Erdogan said during an address to supporters: "Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks".
Presenting the government's new economic model, Albayrak said the next steps of rebalancing would entail lowering the current account deficit and improving trust. Turkey was reportedly the sixth largest steel importer to the US.
New Finance Minister Berat Albayrak - Erdogan's son-in-law - acknowledged that the central bank's independence was critical for the economy, promising stronger budget discipline and a priority on structural reforms.
"This is a national, domestic battle".
He appeared to blame foreigners for trying to hurt Turkey, saying: "This will be my people's response against those waging an economic war against us".
"The last time I can remember a currency exploding into a similar acceleration of weakness to what we have seen in the past 24 hours is the Russian ruble crisis that transpired late in 2014", Jameel Ahmad, the head of currency strategy at FXTM, said.
He said there would be a "transformation" in the finance ministry with regards to taxation. Hard currency debt issued by Turkish banks suffered similar falls.
The sharp decline of the lira, and worries over the wider consequences of Turkey's economic turmoil, helped drive the main stock indexes in Tokyo, Frankfurt and Paris more than 1 percent lower.