Economy

Turkish Currency Collapses After Trump Doubles Metals Tariffs

Turkish Currency Collapses After Trump Doubles Metals Tariffs

President Tayyip Erdogan told Turks to exchange gold and dollars into lira as the currency tumbled after President Donald Trump doubled USA tariffs on metals imports from Turkey.

Erdogan on Thursday portrayed the currency drop as a "campaign" to harm Turkey and called on the people not to worry. Relations between the United States and Turkey have been weakening for several reasons.

Fears over contagion even pushed global equity markets lower, with some European banks coming under heavy selling pressure due to their exposure to Turkey.

The accelerated lira sell-off also deepened concerns about the exposure of banks to Turkey, particularly whether highly indebted companies would be able to pay back loans taken out in dollars and euros after years of overseas borrowing to fund a construction boom under Turkish President Tayyip Erdogan.

The Lira touched a historic low versus the U.S dollar. It has fallen by over 35% this year.

In New York, the Dow Jones Industrial Average fell 185.15 points, or 0.73 per cent, to 25,324.08. That caused a further drop in the lira.

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. "It is a national fight", he said. This will be my people's response to those who have waged an economic war against us'.

"Do not worry!" He said Turkey was not afraid of "threats" and added Turkey had "alternatives" for economic cooperation in many places "from Iran, to Russian Federation, to China and some European countries". Those words will further alarm many investors, suggesting that Turkey will neither impose a conventional economic programme to protect its currency nor find a way to come to terms with the USA over a tangle of issues that have brought them to loggerheads - chiefly, the jailing of United States missionary Andrew Brunson on terrorism charges.

Image: Donald Trump claimed 'relations with Turkey are not good at this time!' "The dollar, the mollar, will not cut our path", said Erdogan using a figure of speech he repeatedly uses to mock something.

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Turkish President Tayyip Erdogan has remained defiant despite the lira being in free fall.

Finally, Turkey is also embroiled in a political stalemate with the United States that has signs of spiralling into sanctions and fines between the two North Atlantic Treaty Organisation allies.

It added that Trump's remarks were "not possible to reconcile with state seriousness". Since the start of the year, it is now down a full 41 percent against the dollar. USA stocks were also rattled.

Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency. But since adopting increased powers, Erdogan appears to have greater control over the bank as well.

Erdogan said Turkey is not afraid of outside "threats".

On August 1 Washington announced sanctions against Turkey's justice and interior ministers, prohibiting USA entities and citizens from doing business with them, after threatening to impose "large sanctions" if Ankara failed to free Brunson.

The latest escalation came as Turkey's Economy Minister Berat Albayrak, who is Erdogan's son-in-law and a trusted lieutenant, unveiled what was touted as a new economic plan, pledging Central Bank independence, tighter budget discipline and sustainable and healthy growth.

While the lira's plunge could drag down the Turkish economy, the impact on euro zone banks in general is seen as modest, economists said.


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