Published: Sat, August 11, 2018
Economy | By

Turkish lira plunges as Trump hits Ankara with increased tariffs

Turkish lira plunges as Trump hits Ankara with increased tariffs

"This innocent man of faith should be released immediately", Trump previously wrote on Twitter when it became clear Turkey would not release the evangelist, who was ordered to be held under house arrest.

President Trump said Friday the USA will double tariffs on steel and aluminum for Turkey, noting the relationship between the two states "are not good at this time!"

Turkey's woes shook world markets, pushing down stock indexes and lifting the dollar, which traders around the world typically buy in times of concern. The U.S. recently hit two high-ranking Turkish officials with sanctions after the Turkish government refused to release imprisoned Christian pastor Andrew Brunson.

Turkey, a North Atlantic Treaty Organisation ally, him on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago.

The ripple effects of Turkey's spiraling currency crisis was felt globally as the Dow Jones Industrial Average and the S&P 500 fell 0.8% and 0.5%, respectively, following Trump's tweet.

President Tayyip Erdogan told Turks to exchange gold and dollars into lira as the currency tumbled after President Donald Trump doubled US tariffs on metals imports from Turkey.

The lira plunged as much as 14 per cent on Friday, as worries about Erdogan's influence over monetary policy and worsening USA relations snowballed into a market panic.

"If you have dollars, euros or gold under your pillow, go to banks to exchange them for Turkish lira", he said on national television. "It is a national fight", he said.

As President Erdogan continues to exert an iron grip on the government, economy, and people of Turkey, and the specter of a Turkish debt crisis continues to loom, the country's economy and currency are apt to remain under heavy pressure.

The lira's value fell about 13 percent against the dollar on Friday.

On March 1, Trump had announced global tariffs of 10 percent on all aluminum to the USA and 25 percent on all steel imports.


A statement from the Kremlin said the two leaders discussed economic and trade ties.

The fall has come as Turkish President Recep Tayyip Erdogan has moved to take greater control of monetary policy.

The two countries are also divided over the detention of three locally employed USA consular staff, Washington's sanctions on Iran, Turkey's plans to buy a Russian missile defense system, and their military interventions in Syria.

Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency.

What's happening to Turkey's currency right now?

"President Erdogan's strengthened powers under the new presidential system have made it increasingly uncertain whether policymakers will be able to act to stabilise the economy", said William Jackson, chief emerging markets economist at Capital Economics in London. "Don't heed them. Don't forget, if they have their dollars, we have our people, our God", Erdogan said.

Berat Albayrak, the Treasury minister and Mr Erdogan's son-in-law, is due to announce a "new economic model" for Turkey... Trump's Friday tweet caused a further drop in the Turkish currency.

In 2016, when the dollar began to rise, the Grand Bazaar said it had chose to accept rent in lira to support the Turkish economy.

Coupled with an inflation rate of almost 16 percent, that could cause a lot of damage to the local economy.

The lira was trading at 5.95 to the dollar, a loss on the day of 7.5 percent.

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