USA tariffs hike adds to Turkey's economic problems

13 Agosto, 2018, 04:37 | Author: Kelly Blake
  • Turkish delegation returns home after meeting in US

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.

Turkey's currency dropped some 16 percent to new record lows against the dollar on Friday.

On Friday, the Turkish currency plunged to another record low amid concerns over Erdogan's unorthodox economic policies and a diplomatic row with the United States that has led to sanctions.

One of the hard issues affecting U.S.

While Turkey and the United States are at odds over a host of issues, the most pressing disagreement for Trump has been the fate of American Christian pastor Andrew Brunson, who is on trial on terrorism charges for allegedly supporting a group that Ankara blames for a failed coup in 2016.

The US responded by slapping sanctions on Turkey and threatening more.

"The US runs the risk of losing Turkey as a whole", he wrote.

The final gut punch to the lira came after Erdogan's speech, when Trump tweeted that he had "just authorized a doubling of tariffs on steel and aluminum with respect to Turkey".

On Sunday, Erdogan, in an OpEd The New York Times, cited Turkey's cooperation with the USA dating back to the Korean War as evidence of a long-standing partnership between the North Atlantic Treaty Organisation allies.

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"Unless the United States starts respecting Turkey's sovereignty and proves that it understands the dangers that our nation faces, our partnership could be in jeopardy", he wrote.

Earlier in an editorial in Saturday's The New York Times, Erdogan said: "Attempting to force my government to intervene in the judicial process is not in line with our Constitution or our shared democratic values".

"It is making an operation against Turkey ..."

The lira's free-fall was the result of a foreign plot and did not reflect Turkey's economic fundamentals, he said.

"The basic reason the exchange rate has gone off the rails is that confidence in the management of the economy has disappeared both domestically and overseas", said Seyfettin Gursel, a prominent economist and a professor at Turkey's Bahcesehir University. He claims higher rates lead to higher inflation - the opposite of what standard economic theory says.

The central bank raised interest rates to support the lira in an emergency move in May, but it did not tighten at its last meeting.

In modern economies, central banks are meant to be independent of governments to make sure they set policies that are best for the economy, not politicians. And like with the lira, investors found new reasons on Friday to dump the currency.

"If you have dollars, euros or gold under your pillow, go to banks to exchange them for Turkish lira. This is a domestic and national struggle".

President Recep Tayyip Erdogan vowed Saturday to defy U.S. "threats" over a detained pastor, showing no signs of concessions in a bitter row that has caused the Turkish lira to crash.

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