Published: Sat, August 11, 2018
Finance | By Jaime Brady

Trump OKs stiffer tariffs on Turkish metals as lira plummets

Trump OKs stiffer tariffs on Turkish metals as lira plummets

The embattled lira tumbled 16 percent against the dollar on Friday, with US President Donald Trump saying he had doubled steel and aluminium tariffs on Turkey in comments that contributed to the currency's further slide. That turned into a rout on Friday, with the currency diving as much as 18 per cent at one point, the biggest one-day drop since a 2001 financial crisis in Turkey.

Turkey fears the fine on Halkbank - a small player by global standards - could follow the precedent of the hefty USA treasury fines levied on German and Swiss banks for sanctions-busting.

In June, the U.S. Senate passed a bill prohibiting Turkey from buying F-35 fighter jets because of Brunson's imprisonment and Turkey's purchase of Russia's S-400 air defense system.

The Turkish lira has fallen more than 10% against the dollar after a Turkish delegation in Washington failed to prevent USA sanctions.

The White House cited national security grounds as the means by which Mr Trump had authorised a 50% steel tariff and 20% aluminium tariff on Turkey.

He also said it was wrong of the U.S. to try to bring Turkey into line with threats, a day after Trump doubled tariffs on steel and aluminium imports from Turkey.

Trump is also declaring that, "Our relations with Turkey are not good at this time!".

Turkey accounted for 373 million euros of BBVA's its first half net attributable profit, 14 percent of the group total, suggesting that it may be the most vulnerable to the country's market turmoil. Financial upheaval risks further destabilizing an already volatile region.

Turkey's demand the United States extradite Islamic cleric Fethullah Gulen, who Ankara has said orchestrated a failed 2016 military coup against Erdogan is another sore point between the two countries.

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Since then, its relationship with Turkey, the sixth largest steel importer to the United States, has deteriorated, prompting Ankara to send a delegation this week to Washington to meet with both the State and Treasury Departments.

"Over the years, Turkey rushed to America's help whenever necessary", he said, listing a few occasions the two countries acted together. "We are knowledgeable with justice and law", Erdogan said in his address in the Black Sea province of Ordu.

In what appeared to be a diplomatic slight, Turkey announced soon after Trump's tweet that Erdogan had held a phone call with Russian President Vladimir Putin about "strengthening economic and trade ties".

"This will be the response to those who have declared an economic war", he said, blaming Turkey's woes on what he described as an "interest rate lobby" seeking to push the country to higher rates.

A Turkish man waits to change his US dollars with Turkish liras inside a currency exchange shop in Ankara, Aug. 10, 2018.

"This is a national, domestic battle".

One of the triggers of the turmoil has been a standoff with the US over a detained American pastor that Turkey, a North Atlantic Treaty Organisation ally, has put on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago. Since the last financial crisis, Turkey has posted impressive growth figures but over recent years this growth has been accompanied by increasing debt. It is obvious how it will be done: "since the final decision-maker of all policies in the new regime is the president, the responsibility of regaining confidence is on his shoulders", said Seyfettin Gursel, a professor at Turkey's Bahcesehir University. Hard currency debt issued by Turkish banks suffered similar falls.

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.

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