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Turkey in danger zone as Trump raises tariffs

11 August 2018

Criticizing the state of the US relationship with Ankara, Trump announced on Twitter that he had authorized a doubling of duties on aluminum and steel imported from Turkey, making them 20 percent and 50 percent respectively.

President Trump has doubled United States tariffs on Turkish steel and aluminium, as the precipitous fall of the Turkish lira accelerates.

On March 1, Trump had announced global tariffs of 10 percent on all aluminum to the USA and 25 percent on all steel imports. The currency's slide deepened early Friday, after the Financial Times reported that the eurozone's chief financial watchdog was concerned about how some of Europe's biggest lenders would be affected by a crisis in Turkey.

"The president launched his steel and aluminum tariffs on the grounds that maintaining a robust domestic metal industry was a core national-security interest of the United States, and that competition with metal imports was threatening to drive said industry into extinction".

Turkey exported $1.04 billion (€0.91 billion) worth of steel and $60 billion worth of aluminum to the USA in 2017, according to the Hurriyet newspaper.

Trump's announcement came as Turkey's embattled lira hit new record lows against the U.S. dollar and euro, losing almost nine percent in value as strains with the United States showed no sign of abating and fears grew over the exposure of European banks.

Erdogan appealed to Turks to exchange dollars and gold for Turkish lira to support the plunging currency.

Turkey's President Recep Tayyip Erdogan addresses his supporters in Bayburt, Turkey, Friday, Aug. 10, 2018. The president - instead of reassuring the markets, whose collapsing confidence is one of the main drivers behind the lira's unprecedented depreciation - slammed Western countries and accused them of waging economic warfare on Turkey.

Turkey remains at loggerheads with the United States 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.

Wild brawl at nail salon
Police say Thomas hit an employee, who then in turn struck the customer with a broom. A protest was held outside the salon on Monday morning.

Turkey's woes also shook world markets, pushing down stock indexes. Rate increases are the central bank's main tool to support the currency and fight inflation. "Making a speech like Albayrak's in the midst of a currency free fall without a single concrete measure shows utter lack of comprehension about what's happening and what's required", tweeted Harvard economist Dani Rodrik.

Then there are Turkey's worsening relations with the US.

A year ago, there were 3.5 liras to the USA dollar.

The currency's drop - 40% so far this year - has become a gauge of fear over a country facing the fallout of years of debt-fuelled growth, global concern over President Recep Tayyip Erdogan's push to amass power, and a souring in relations with allies like the US.

The lira hit a record low of 6.24 per dollar on Friday, before recovering to 5.92 - still down a whopping 7 per cent on the day. He seems to see Turkey's collapsing currency not as an existential threat to their economy they are trying to forestall, but rather as something they actively want to try to make their exports more competitive.

Such factors could lead regulators to ask a bank like UniCredit - which is exposed to both Turkey and Russian Federation - to set aside more capital against those risks, Credit Suisse Group AG analysts led by Carlo Tommaselli said in a note.

"While Turkey's fundamental challenges are numerous, there are plenty of straightforward textbook solutions.an aggressive interest rate hike from the Central Bank would be a good start, something of the order of +1,000bp that Argentina delivered back in May would be appropriate at this juncture".

After his June 24 election victory, Mr Erdogan put his son-in-law Berat Albayrak in charge of a newly expanded finance ministry while a new presidential system did away with the office of prime minister, whose last incumbent Binali Yildirim had on occasion urged caution in economic policy.

Turkey is front and center of the chaos on Friday, with its currency plunging to a record low against the USA dollar.

Turkey in danger zone as Trump raises tariffs