Published: Sat, August 11, 2018
Money | By Ralph Mccoy

Trump doubles metal tariffs on Turkey as lira falls by 20%

Trump doubles metal tariffs on Turkey as lira falls by 20%

-Turkish tensions are threatening a financial crisis in Turkey.

Turkey is world's sixth-biggest steel producer, and eighth largest steel importer for the United States according to the International Trade Administration.

Still, the sell-off may not be over after the government struck a defiant tone on Friday even after Trump's move.

The MSCI All-Country World index, which tracks shares in 47 countries, was down 0.6 percent on the day, having erased all its gains for the week.

Zafer Tulus, whose family has owned a butcher shop for more than 200 years, has been forced to close down the business.

Reuters Turkey's president, Recep Tayyip Erdogan, listens during a news conference with British Prime Minister Theresa May in London, U.K., May 15, 2018.

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.

Paul Greer at Fidelity International said dramatic interventions were now needed as Turkey faced a "downward spiral" of investor confidence.

Turkey was facing artificial financial volatility, Erdogan said, and people should not pay close attention to foreign exchange prices, and should instead focus on the "big picture".

The lira fell further as Erdogan spoke. Trump and Vice President Mike Pence threatened on July 26 to impose sanctions on Turkey if the pastor is not set free and allowed to return to the United States.

Turkey is now under a 25 percent tariff on imported steel and 10 percent on aluminum, which went into effect in March.

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

Hordijk said in an email: "President Erdogan is the elephant in the room ..."

"The dollar, the mollar, will not cut our path", said Erdogan, adding Turkey had alternatives "from Iran, to Russian Federation, to China and some European countries".

A statement from the Kremlin said the two leaders discussed economic and trade ties.

The Turkish foreign ministry hit back at Trump's comments, saying that the "only result will be harming our relationship" and vowing unspecified retaliation.

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

"Other EM currencies have held their ground against the dollar, having generally been weakening previously", said analysts at Capital Economics. The Central Bank's independence should always continue as a principle.

Turkey's new economic perspective was unveiled on Friday by the state's top economic official, Treasury and Finance Minister Berat Albayrak.

On Friday, the euro sagged to a 13-month low against the dollar, down 0.7 per cent to $1.1450, after the Financial Times reported that the European Central Bank was anxious about possible losses at eurozone banks operating in Turkey.

Treasury and Finance Minister Berat Albayrak has vowed to execute Turkey's new economic model together with "all national and global stakeholders", while stressing that a "decisive" approach and the Central Bank's independence would be maintained.

Emerging market currencies are ending the week with a brutal sea of red across the board, with consistent losses throughout Asia, while the South African rand and Turkish lira are leading the way with losses within the EMEA.

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