Higher US tariffs increase pressure on Turkish economy

Andrew Brunson an American pastor is released to home detention last month in Izmir Turkey

The country's economy was already in trouble, but the lira's selloff was heavily compounded by Donald Trump's announcement that he was doubling tariffs on Turkish steel and aluminum.

Unilateral steps taken by the U.S. only harm its interests and security, Turkish President Recep Tayyip Erdogan said on Friday in an article he wrote for The New York Times.

While Turkey and the United States are at odds over a host of issues, the most pressing disagreement has been over the detention of U.S. citizens in Turkey, notably Christian pastor Andrew Brunson who is on trial on terrorism charges. "Repeated efforts to communicate to the U.S. administration that none of the stated criteria driving America's tariffs are applicable to Turkey have thus far proven fruitless", he said. It has lost 40 percent of its value so far in 2018, and reached record lows following Trump's tweet.

In what appears to be a diplomatic riposte, Turkey later said Erdogan had held a phone call with Russian President Vladimir Putin to discuss economic ties.

Meanwhile, markets are deeply concerned over the direction of economic policy under Erdogan, with inflation at almost 16 percent but the central bank reluctant to raise rates in response.

"If there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks", he said during an address to supporters.

Erdogan on Friday called on Turks to support their struggling currency. The lira fell further after Trump's tweet.

He continued: "A painful admittance that his powers are outmatched by the forces of markets and that he may have misjudged the economic situation may be a lot to ask of the autocratic leader Erdogan, but the alternative is that the lira will meet the ground at terminal velocity; an impact that will damage the Turkish economy for years to come".

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Turkish newspaper Hurriyet and other media reports quote Erdogan as making the comment to a group of worshippers following traditional Muslim Friday prayers during a visit to the northern city of Bayburt.

Trump's move sent Turkey's lira currency deeper into tailspin. According to figures from the Turkish Government, for the period of 2002 to October 2017, Turkish direct investments in the United States reached $3.7 billion while US investments in Turkey amounted to $11.1 billion, second only to the Netherlands' 21.6 billion.

"The U.S. runs the risk of losing Turkey as a whole".

"As he stated, the President has authorized the preparation of documents to raise tariffs on imports of steel and aluminum from Turkey", said White House spokesperson Lindsay Walters. "Today I am instructing my friends that we will freeze the assets of U.S. secretaries of justice and interior in Turkey", he said last week.

Turkey, home to the Incirlik air base which is used by US forces in the Middle East, has been a North Atlantic Treaty Organisation member since the 1950s and a close ally of the United States. As the currency drops, Turkish companies and households with debt in foreign currencies see their debts expand. But experts argue that the central bank should instead raise interest rates to ease inflation and to support the currency. Inflation increased 16 percent in July, and Erdogan has insisted that interest rates not increase.

'The price of the food that I buy increases day by day, the fuel that I put in my vehicle to distribute lunches is more expensive, but I can not raise my prices from one day to the next, ' she said. "On some days, I end the day with a loss".

Without naming countries, Erdogan said supporters of a failed military coup two years ago, which Ankara says was organised by a USA -based Muslim cleric, were attacking Turkey in new ways since his re-election two months ago.

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