Trump announces 'doubling' of tariffs on steel, aluminum from Turkey

11 August, 2018, 01:40 | Author: Mary Valdez
  • A U.S. Air Force A-10 Thunderbolt II departs Incirlik Air Base Turkey Jan. 20 2018

Early on Friday, the lira hit a new record low, plunging to as far as 6 against the U.S. dollar after a Turkish delegation returned from talks in Washington on Thursday with no apparent solutions to an ongoing crisis.

In announcing 20 percent tariffs on aluminum and 50 percent tariffs on steel, Trump said "the Turkish Lira, slides rapidly downward against our very strong Dollar!"

"For some time now investors have been looking at the unfolding currency crisis in Turkey as a local difficulty", noted CMC Markets UK analyst Michael Hewson. In the latter's case, investors fear that Europe's banks could sustain large losses if Turkey is forced to default on its debts. One U.S. dollar traded at 5.96 lira by 2:15 p.m.

Aside from the impact a potential Turkish debt crisis may have on European markets and financial institutions, which could have a rippling effect on other global markets, the falling lira also matters because it helps to further depress an already-weakened euro and further strengthen the US dollar, which has been rising sharply for much of this year.

The tweet served to place intensified pressure on the plummeting lira, despite President Erdogan's attempts to limit the damage.

The Turkish lira fell at least 13 percent Friday, as President Erdogan called for people to exchange their other forms of money to the lira. "It is a national fight", he said.

Erdogan appeared to blame foreigners for trying to hurt Turkey, "This will be my people's response against those waging an economic war against us", he said.

Turkey remains at loggerheads with the USA in one of the worst spats between two North Atlantic Treaty Organisation allies in years over the detention of American pastor Andrew Brunson and a host of other issues. European and American bank stocks declined on concerns about their exposure to Turkey.

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Investors in Turkey are also anxious about President Erdogan's interference in the country's central bank.

Turkey vowed retaliation "without delay" and warned the move would further harm relations between the two allies.

It added that Trump´s remarks were "not possible to reconcile with state seriousness".

"There is zero credibility in the Central Bank of Turkey and zero credibility in Turkish policy making". He claims higher rates lead to higher inflation - the opposite of what standard economic theory says. The Central Bank's independence should always continue as a principle.

After winning a June election with revamped powers, Erdogan tightened his control over the central bank and appointed his son-in-law Berat Albayrak to head a newly-empowered finance ministry.

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.

The report said the situation is not yet seen as "critical" but Spain's BBVA, Italy's UniCredit and France's BNP Paribas are regarded as particularly exposed.

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