Trump doubles steel and aluminium tariffs on Turkey as lira nosedives

Marco Green
August 10, 2018

Trump's move reflects a confluence of factors that have led to worsening relations between the White House and Turkish President Recep Tayyip Erdogan, and his willingness to ratchet up economic pain on Turkey could lead to a much bigger clash.

"If there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks".

"Seems like a complete crash, so they need to act now", said Morten Lund, a strategist at Nordea Bank AB in Copenhagen.

The Turkish lira fell against the United States dollar due to mounting tensions between Turkey and the USA in the wake of Ankara's refusal to release American pastor Andrew Brunson who is suspected of being involved with a terrorist group.

The reaction from global currency markets to the rift between two North Atlantic Treaty Organisation allies caused the euro to slump to a 13-month low and pushed the dollar to a one-year high.

Elsewhere, the pound sterling fell sharply against the United States dollar to the lowest since June 2017 on a stronger greenback and growing concerns over Brexit deal with the EU.

"The dollar can not block our path".

Erdogan on Thursday portrayed the currency drop as a "campaign" to harm Turkey and called on the people not to worry. "Don't heed them. Don't forget, if they have their dollars, we have our people, our God", Erdogan said.

Meanwhile, investors are anxious about the economic policies of President Recep Tayyip Erdogan, who won a new term in office in June with sweeping new powers. Treasuries rising to 350 basis points - their highest since July 6.

Caught in a fresh wave of global currency turbulence, the rupee fell sharply by 15 paise to end at 68.83 against the resurgent dollar amid fears of escalation in trade tensions worldwide.

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

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. If this resource will come from China, then it will come from China, but the important thing is to make use of this resource.

"As Erdogan's entire economic agenda is built on high growth, and Erdogan furthermore has highly dismissed capital controls during other crisises (eg. following the coup attempt in 2016), this looks like a measure of last resort".

Concerns were amplified Friday by a report in the Financial Times that the supervisory wing of the European Central Bank (ECB) had over the last week begun to look more closely at eurozone lenders' exposure to Turkey. There would be a transformation in the finance ministry with regards to taxation, he said.

Other reports by Click Lancashire

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