Trump doubles tariffs on Turkey, stoking jitters

  • Trump doubles tariffs on Turkey, stoking jitters

Trump doubles tariffs on Turkey, stoking jitters

Turkey's economy is regarded as fragile because of its high debt, which the global Monetary Fund estimates is 50 percent of its gross domestic product.

Turkey's woes shook world markets, pushing down stock indexes and lifting the dollar, which traders around the world typically buy in times of concern.

The President threatened to levy harsh tariffs on Turkey last month, demanding the release of an American pastor now held by Erdogan's government.

Earlier this week US and Turkish officials met in Washington to discuss issues that have pitted the two North Atlantic Treaty Organisation allies against each other.

Turkish President Tayyip Erdogan makes a speech during a meeting of his ruling AK Party in Ankara, Turkey August 4, 2018.

The latest tariffs stem from the trade fight Trump launched earlier this year with several countries, including Turkey, according to the Washington Post.

"Our relations with Turkey are not good at this time!" he added.

Investors fear Turkey is teetering on the edge of financial crisis following a dramatic plunge in its currency that has gathered pace this week.

"If you have dollars, euros or gold under your pillow, go to banks to exchange them for Turkish lira", he said on national television. "Hopefully we will overcome this disaster and we will also successfully overcome this economic war", Erdogan said.

Erdogan called on Turks to not be concerned about exchange rate movements, mockingly declaring "the dollar, the mollar will not cut our path".

With US sanctions and tariffs hitting Turkey this month for its refusal to release an American pastor, the relationship between the two North Atlantic Treaty Organisation allies is crumbling amid fears on the regional impact.

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.

The lira, which has lost a third of its value this year, fell on his comments and was trading at around 6.05 to the dollar after he spoke, almost 9 percent weaker on the day.

Turkey, a North Atlantic Treaty Organisation ally, him on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago.

However, a report by Credit Suisse said Turkey remained a risk for Italy's biggest bank by assets as the depreciation of the lira could further hit its core capital - which came in lower than expected at the end of June.

Investors piled into "safe" government debt, with German yields hitting three-week lows and the yield on the benchmark USA 10-year Treasury note falling to 2.88822 percent. "This is a national, domestic battle", he said. Erdogan has appealed to the people to convert their dollars to liras, saying Turkey is in the midst of an "economic war" with the West.

New Finance Minister Berat Albayrak - Erdogan's son-in-law - acknowledged that the central bank's independence was critical for the economy, promising stronger budget discipline and a priority on structural reforms. As the currency drops, Turkish companies and households with debt in foreign currencies see their debts expand. At one point, it was down as much as 19 percent on the day, before rallying a bit to bring it to "only" a 13.7 percent loss.