Turkish lira plunged 15% versus dollar Friday after Trump authorizes doubling metals tariffs on Turkey; Erdogan said Turkey was facing an “economic war” and noted the country would respond to those countries who had started it.
AUG 10, 2018: The Turkish lira added to its steep losses on Friday, hitting a fresh record low, after President Donald Trump authorized the doubling of metals tariffs on Turkey.
The lira traded down 15 percent against the U.S. dollar at 6.38 after Trump made the comment in a tweet. The currency also traded down 20 percent earlier in the day, reaching a record low in one day fall since Turkey’s 2001 financial crisis — the lira has lost more than 35 percent against the dollar this year.
“I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!,” Trump tweeted today.
The White House later said in a statement: “As he stated, the President has authorized the preparation of documents to raise tariffs on imports of steel and aluminum from Turkey. Section 232 tariffs are imposed on imports from particular countries whose exports threaten to impair national security as defined in Section 232, independent of negotiations on trade or any other matter.”
Trump’s tweet and the White House comment came after Turkish President Recep Tayyip Erdogan asked citizens to convert their dollars and other foreign currencies as well as gold holdings to local lira.
Food, rents and fuel prices in Turkey have all surged. The state pipeline operator last week raised the price of natural gas for electricity production by 50 percent.
“Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks. This is a domestic and national struggle,” Erdogan said, according to an Associated Press translation.
Erdogan said Turkey was facing an “economic war” and noted the country would respond to those countries who had started it — Erdoğan also spoke by phone with Russian President Vladimir Putin to discuss “trade and economic cooperation,” the Kremlin said Friday.
The statement will fuel speculation that Erdoğan is moving closer to Russia as relations worsen between Turkey and the United States, even though both countries are NATO members.
“A telephone conversation took place between Vladimir Putin and the President of the Republic of Turkey Recep Tayyip Erdoğan,” the Kremlin statement said.
“We are facing economic attacks today, and we need to defend our country,” Erdogan said, according to a translation. “The economic attack against us now is the same as the coup attempt against us. I’m urging our country to increase outputs, to increase exports.”
Turkish stocks also fell on Friday as the iShares MSCI Turkey ETF dropped 14.9 percent. The ETF was already down 42.3 percent this year prior to Friday’s losses.
The sharp drop in Turkish assets came after a delegation returned from Washington with no apparent progress on the detention of U.S. pastor Andrew Brunson, who is charged with supporting a group blamed for an attempted coup in 2016.
Last month, Trump threatened to slap “large sanctions” on the country if it refuses to free Brunson. The U.S. then announced on Aug. 1 sanctions on Turkey’s justice and interior ministers, prohibiting U.S. citizens from doing business with them.
Sentiments about the causes of the crisis are shared by many Turks and the local media and hint at why support for President Tayyip Erdogan, who won re-election in June with super-charged presidential powers, looks untouched, at least for now.
His loyal supporters see the currency sell-off as a U.S. attempt to undermine their country and president.
“If they have their dollars, we have our people, our God,” Erdogan said in a speech overnight, casting the lira’s slide as a campaign against the nation.