USA tariffs hike adds to Turkey's economic problems

USA tariffs hike adds to Turkey's economic problems

USA tariffs hike adds to Turkey's economic problems

Ankara's rocky relations with Washington took a further hit as President Donald Trump lobbed fresh salvoes via Twitter against Turkey, plunging the sagging Turkish lira to new lows against the dollar.

Turkey remains at loggerheads with the United States over the detention for the last two years of American pastor Andrew Brunson and a host of other issues. Mr. Trump tweeted Friday morning.

Erdogan also yesterday held telephone talks with Russian President Vladimir Putin, discussing economic and trade issues as well as the Syria crisis, the Turkish presidency said.

"Those who can't compete with us on the ground have brought online fictional currency plots that have nothing to with the realities of our country, production and real economy", Erdogan told a provincial meeting of his AK Party in the Black Sea coastal town of Rize.

"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.

Economists say that while the government may be tempted to muddle through the current situation in the hope the external and economic background improves, the lira's fall harbors considerable dangers for the economy, in particular the banking system.

Put these all together, and you get a pretty classic emerging markets crisis: Money has been leaving Turkey because it can now get good enough returns elsewhere, which is then pushing down the value of their currency so much that their dollar debts are getting harder to pay back.

The Turkish lira tumbled 16 per cent against the dollar on Friday.

Analysts suggest Erdogan could have Washington in mind, given Ankara is demanding the extradition of USA -based Turkish cleric Fethullah Gulen, who is blamed for masterminding the botched 2016 military takeover.

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His tone echoed that of a speech given on Thursday when he told supporters that "if they have dollars, we have our people, our righteousness, and our God".

"When it comes to cornering Turkey to extract certain concessions that undermine our sovereign rights, it is a whole another story".

"Before it is too late, Washington must give up the misguided notion that our relationship can be asymmetrical and come to terms with the fact that Turkey has alternatives".

He did not offer an explanation for the tariff hike, which raises the tariffs to 20 percent on aluminum and 50 percent on steel, though there are a couple of possibilities.

Erdogan, who says a shadowy "interest rate lobby" and Western credit ratings agencies are attempting to undermine Turkey's economy, said Turks should exchange their gold and dollars into lira to help the currency. The U.S. responded by slapping sanctions on Turkey and threatening more.

The recent plunge comes after a Turkish delegation in Washington failed to stop the U.S. from imposing sanctions against two senior ministers.

In Rize, Erdogan said the USA would pay a price by challenging Turkey for the sake of "petty calculations", denouncing Washington for declaring "economic war on the entire world" and holding countries "for ransom through sanction threats".

Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency.

Aylin Ertan, a 43-year-old caterer in Ankara, said she was concerned over the future of her small business. 'On some days, I end the day with a loss'. I hope we can soon get Pastor Brunson and other Americans released in a win-win fashion for both the U.S. and Turkey."Trump's move to double tariffs on Turkey was even praised by one of the president's most frequent Democratic critics".

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