Turkey's floundering economy exacerbated by Trump tariffs

Turkey's floundering economy exacerbated by Trump tariffs

USA sanctions against top Turkish government officials and unorthodox economic policies by Turkey's President Recep Tayyip Erdogan have spooked markets.

Donald Trump said Friday his administration had doubled steel and aluminum tariffs on Turkey, imposing a 20 percent duty on aluminum and a 50 percent levy on steel. U.S. President Donald Trump introduced a round of sanctions on August 1, preventing the Turkish justice an interior ministries from doing business with U.S. businesses.

Erdogan said that there were "various campaigns being carried out" against the country.

"The dollar, the mollar, will not cut our path", said Erdogan, adding Turkey had alternatives "from Iran, to Russian Federation, to China and some European countries".

Turkey's massive debt obligation to other countries is evident in the extraordinarily large percentage of its debt that is denominated in foreign currencies.

"We will not lose the economic war", state-run TRT Haber TV quoted Erdogan as saying, according to Agence France-Presse.

"However, I say it once again from here, if there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks".

But President Erdogan brushed off any concerns during a speech in the northeastern city of Bayburt on Friday, saying: 'The dollar can not block our path.

Turkey's economic woes worsened after US President Donald Trump escalated a feud with Turkey by doubling tariffs on metals imports.

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Erdogan called on Turks to not be concerned about exchange rate movements, mockingly declaring "the dollar, the mollar will not cut our path".

This means that we can expect a prolonged mixed sentiment towards global stocks, low attraction towards emerging market currencies but a stronger dollar and Japanese yen.

A plunge in the Turkish lira rocked global equities and emerging markets on Friday and fear of more turmoil sent investors scurrying for safety in assets like the yen and USA government bonds.

The lira, which has lost more than 40 percent this year, hit a new record low after Trump took steps to punish Ankara in a wide-ranging dispute.

The marked drop came as Turkey's current strains with the United States showed no sign of abating. "If they have the dollar, we have Allah", he said in a speech early today.

Treasury and Finance Minister Berat Albayrak has vowed to execute Turkey's new economic model together with "all national and global stakeholders", while stressing that a "decisive" approach and the Central Bank's independence would be maintained. At one point, it was down as much as 19 percent on the day, before rallying a bit to bring it to "only" a 13.7 percent loss.

In a statement, the White House said the president had authorized the preparation of documents to raise tariffs, citing national security concerns.

Erdogan, a self-described "enemy of interest rates", wants cheap credit to fuel growth, but investors fear the economy is overheating. As the currency drops, Turkish companies and households with debt in foreign currencies see their debts expand.

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