Erdogan tells Turks to buy plunging lira as Trump turns the screws

Fredrick Soto
August 11, 2018

US President Donald Trump said he had authorized higher tariffs on imports from Turkey, imposing a 20 percent duty on aluminium and 50 percent one on steel.

This prompted yet another tweet from President Trump, this time announcing the actual authorization of the doubling of tariffs on steel and aluminum for Turkey. Trump said on Twitter.

A "gigantic rate hike" of at least 500 basis points to calm markets and a clear commitment from the Central Bank of Turkey to support the currency could help halt the decline, Hordijk said, adding, "Another bandage to stop the lira from bleeding to death would be capital controls, but Erdogan opposes these measures".

Since then, its relationship with Turkey, the sixth largest steel importer to the United States, has deteriorated, prompting Ankara to send a delegation this week to Washington to meet with both the State and Treasury Departments.

The United States had warned it was reviewing Turkey's duty-free access to its markets, after Ankara imposed retaliatory tariffs on U.S. goods in response to American tariffs on steel and aluminium.

Erdogan said during an address to supporters: "Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks".

In addition to the steep drop in the Turkish Lira, which effectively reduces the impact of the tariffs, the US has so far been unsuccessful in persuading Turkish President Recep Tayyip Erdoğan to release USA pastor Andrew Brunson.

"Turkey expects other member countries to abide by worldwide rules", the country's trade ministry said in a statement.

While Turkey and the United States are at odds over a host of issues, the most pressing disagreement has been about the fate of American Christian pastor Andrew Brunson, who is on trial on terrorism charges for allegedly supporting a group that Ankara blames for the failed coup.

The Trump administration has called upon Erdoğan to release Brunson for months.

Stocks sold off around the world, with USA equities erasing what would've been a sixth weekly gain as Turkey's economic crisis deepened. Erdogan has been putting pressure on the central bank to not raise interest rates in order to keep fueling economic growth. On Friday morning, he told his followers in the remote eastern province of Bayburt that "the dollar or anything like it will not be able to stop us going on our way".

The higher returns make them attractive as a relatively stable source of income, but it is critical to understand country and currency risk.

The value of Turkey's currency has nosedived since January and has lost more than 34% of its value against the dollar.

U.S. stocks fell Friday amid the geopolitical concerns that pushed the Turkish lira to the record low against the dollar.

Reuters Turkey's president, Recep Tayyip Erdogan, listens during a news conference with British Prime Minister Theresa May in London, U.K., May 15, 2018.

While the International Monetary Fund has a history of lending a hand to Turkey, Erdogan is wary of the organization, creating barriers to a bailout.

The Lira has plunged 66% since the start of the year, pushing up the cost of goods for Turkish people and shaking worldwide investors' confidence in the country. Overnight it had retreated to its lowest since November 2016 on threats of new USA sanctions, weakening beyond the psychologically important 65-per-dollar threshold.

Turkish President Recep Tayyip Erdogan and his newly appointed finance minister, Berat Albayrak, are due to speak at 2 p.m. local time Friday.

"At the same time, the new US sanctions against Russian Federation have unleashed concern in the German economy", he added.

Other reports by

Discuss This Article

FOLLOW OUR NEWSPAPER