Trump OKs stiffer tariffs on Turkish metals as lira plummets

Marco Green
August 11, 2018

U.S. President Donald Trump further escalated tensions with Turkey Friday by announcing a sharp increase in tariffs on steel and aluminum imports in an early morning post on Twitter.

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

Trump is also declaring that, "Our relations with Turkey are not good at this time!" Turkey has mostly done that to itself - until, that is, Trump started tweeting.

The lira tumbled about 10 percent on Friday to another record low as investors anxious about Erdogan's unorthodox economic policies and US sanctions.

President Tayyip Erdogan of Turkey has told his citizens to sell their savings held in euros and dollars and buy lira in order to prop up the lira, citing an "economic war" after the country's currency has plummeted.

"This is a national, domestic battle".

Without naming countries, Erdogan said supporters of a failed military coup two years ago, which Ankara says was organized by a US -based Muslim cleric, were attacking Turkey in new ways since his re-election two months ago to a new executive presidency.

It fell to a record low this morning, and has now dropped 18 per cent today to 6.5 lira to the dollar, compared with 5.5 lira last night, as a deepening monetary crisis and diplomatic relations with the USA deteriorated.

Officials from Mr Erdogan's office said the two men "expressed pleasure" that relations between Turkey and Russian Federation were progressing "positively" amid joint defence and energy projects.

The United States is the world's biggest steel importer.

The lira, which had traded at 4 to the dollar as late as April, was being quoted at more than 7 to the dollar at one point Friday before rebounding to about 6.4.

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

"The Turkish Lira is in a state of crisis, as a result of investor confidence in Turkish assets remaining at alarmingly low levels", said Jameel Ahmad, Global Head of Currency Strategy & Market Research at FXTM.

He also said increasing production, exports and employment was the best response to the country's challenges.

They are also concerned over the central bank's ability to rein in persistent double-digit inflation with the president repeatedly calling for lower rates. Erdogan's speech caused the value of the lira to drop even further.

"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.

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.

You can follow the lira price live on Markets Insider.

The currency drop is particularly painful for Turkey because the country finances a lot of its economic growth with foreign investment. President Erdogan has pressured the central bank to maintain low interest rates by refraining from implementing much-needed hikes.

Other reports by Click Lancashire

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