Trump's tariff tweet inflames Turkey's economic crisis and strained USA relations

11 Agosto, 2018, 09:24 | Author: Arnold Perez

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.

Trump intensified the alarm on financial markets with his new tweet doubling the tariffs, noting for good measure the lira was sliding "rapidly downward against our very strong Dollar!".

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.

"Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks".

The tweet is another salvo in the growing dispute between Turkey and the U.S.

The lira hit a record low of 6.24 per dollar on Friday, before recovering to 5.94, down 7 percent on the day. "The cheap lira actually can help increase their export volume", said George Gero, a managing director at RBC Wealth Management who follows metals markets.

Lapid's praise for Trump came after the United States president announced the doubling of steel and aluminum tariffs on Turkey.

Emerging market stocks lost 1.66 percent, while the Mexican peso, a proxy for emerging market currencies, shed 1.29 percent to the dollar.

The dollar rose as exposure to Turkey could impact European banks and spark a domino effect as people begin to pull out of those banks and into USA assets, said Gregan Anderson, macroeconomic strategist at brokerage Bulltick LLC. U.S. President Donald Trump introduced a round of sanctions on August 1, preventing the Turkish justice an interior ministries from doing business with U.S. businesses.

It argued that the country accounted for less than 2 percent of group revenues and a 10 percent fall in the lira would affect its CET1 ratio - capital that must be set aside as a buffer against financial shocks - by only around 2 basis points.

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"Most of the actors in the Washington scene think that carrots just don't work with Turkey, just the stick", said political analyst Atilla Yesilada of Global Source Partners.

Already, U.S. -Turkey relations have been strained over an array of conflicts.

"As he stated, the president has authorized the preparation of documents to raise tariffs on imports of steel and aluminum from Turkey", White House Deputy Press Secretary Lindsay Walters said.

Shares in France's BNP Paribas, Italy's UniCredit and Spain's BBVA, the banks seen as most exposed to Turkey, fell 4 per cent or more.

Markets are deeply concerned over the direction of domestic economic policy under Erdogan with inflation at almost 16 per cent but the central bank reluctant to raise rates in response.

The US, meanwhile, rates Turkey at level three, urging people to reconsider travel to the region.

President Trump seems to think that Turkey has been trying to take advantage of us by having an economic crisis that's sent their currency he's taken steps to make it tumble even more?

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.

A delegation of Turkish officials held discussions with their counterparts in Washington this week but there was no sign of a breakthrough.



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