Turkey's President Recep Tayyip Erdogan says the 'language of threats and blackmail cannot be used against this nation' following Trump's tweet. Photo / AP
Turkey's President Recep Tayyip Erdogan says the 'language of threats and blackmail cannot be used against this nation' following Trump's tweet. Photo / AP
President Recep Tayyip Erdogan warned on Friday against those who try to "bully" his country, as an announcement by US President Donald Trump imposing new tariffs on Turkey sent the Turkish currency into a free fall.
"The language of threats and blackmail cannot be used against this nation," Erdogan said in apparent response to Trump's early-morning tweet saying he was doubling existing US import levies on Turkish steel and aluminum. "Those who assume they can bring us to our knees through economic manipulations don't know our nation at all," he said, without directly mentioning Trump or the tariffs.
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!
But the US announcement quickly sent the value of the Turkish lira, already under severe strain, to a record low against the US dollar. The currency crisis has fueled growing concerns in the international financial community and among investors about the health of the Turkish economy.
Relations between the two NATO allies were already in a downward spiral over a host of issues, including Syria policy, weapons purchases and the fallout from a 2016 coup attempt against Erdogan. And there were immediate signs Friday that Russia could try to exploit the latest row between the United States and Turkey, a country where the US military maintains a critical air base for operations in the Middle East.
Trump's willingness to ratchet up the financial pain on Turkey followed an unsuccessful effort this week to resolve the ongoing dispute between the two countries over Andrew Brunson, an American pastor held on charges that include espionage and trying to overthrow the government.
Trade Minister Ruhsar Pekcan said that Turkey was "deeply disappointed" by the tariff decision and that it would "not only impact Turkey, but . . . American companies and workers as well." Disputes between the two countries, she said in a statement, "can and should be resolved through dialogue and cooperation."
The Brunson case is far from the only issue between Washington and Ankara. Turkey has demanded the extradition of a Turkish cleric living in Pennsylvania who it charges was the mastermind of a 2016 coup attempt against Erdogan. It also wants the release of a Turkish banker convicted here this year as part of an ongoing US federal investigation of alleged violations of oil sanctions against Iran by a Turkish state bank.
Turkish citizens look at a board showing foreign currency rates inside a currency exchange shop in Ankara, Turkey, as its currency nosedived yesterday. Photo / AP
A high-level Turkish delegation that met here this week with Deputy Secretary of State John Sullivan anticipated trading Brunson for Hakan Atilla, the convicted banker. But the meeting apparently was cut short when the US side demanded the immediate and unilateral release of Brunson, whose case has become a cause celebre in Congress and among evangelical Christians, who are an important part of Trump's political base.
At the same time, Congress has passed legislation preventing the export of 100 F-35 jets, purchased by Turkey in a co-production agreement, unless Ankara releases Brunson and drops a deal to buy a sophisticated Russian air defense system.
As Turkey becomes increasingly estranged from the United States, it has solidified relations with Russia, particularly between Erdogan and President Vladimir Putin. The two spoke on the telephone Friday morning soon after Trump's tariff announcement. After the call, Erdogan hailed Turkey's economic ties with Russia, saying that "these contacts make us stronger".
Trump first threatened Turkey over the Brunson case in July, when he tweeted that "the United States will impose large sanctions on Turkey for their long time detainment of Pastor Andrew Brunson, a great Christian, family man and wonderful human being. He is suffering greatly. This innocent man of faith should be released immediately!"
On August 1, the United States imposed sanctions on two Turkish cabinet ministers.
In announcing the new measures, in a Twitter post Friday morning, Trump noted the slide of the Turkish currency "against our very strong Dollar." Relations with Turkey, he wrote "are not good at this time."
The White House later said the tariff increases, to 20 per cent for aluminum and 50 per cent for steel, were unrelated to "negotiations on trade and any other matter" and were being increased under provisions for response to threats "to impair national security."
Earlier this year, Trump imposed tariffs of 10 per cent on aluminum imports and 25 per cent on steel to combat the effects of subsidised Chinese steel production on global markets. To prevent Chinese companies from routing steel shipments through third countries, the administration also applied the import taxes to a number of US allies, including Turkey, under the same provision of US trade law, which declared that relying on foreign metals poses a risk to national security. The levies have been applied to a range of US allies, including Japan, Canada and members of the European Union.
Experts on Turkish politics have long compared the styles of Trump and Erdogan as divisive leaders, and the two have previously declared their admiration for each other. But the same stubbornness that appears to drive Trump to take actions is likely to cause Erdogan to dig in his heels.
A Turkish waits to change his US dollars with Turkish liras inside a currency exchange shop in Ankara. The liras has fallen to a record low against the US dollar. Photo / AP
Soner Cagaptay, director of the Turkish research programme at the Washington Institute for Near East Policy, predicted that Erdogan's response to the new tariffs "will be perhaps completely opposite to what the United States wants to achieve."
"Erdogan has built a conservative base that loves him but has also demonized and brutalized the demographic that is unlikely to vote for him," Cagaptay said. "He is going to cast sanctions as an economic attack on Turkey . . . and on his mission to make Turkey great and make Muslims proud again."
After stalling in the aftermath of a failed 2016 coup attempt, the Turkish economy rebounded last year and has been growing at an annual rate of more than 7 per cent.
But the prognosis for long-term economic health is not optimistic, and aggressive state efforts to fuel growth under Erdogan's strongman rule are on a collision course with economic imperatives.
After a ramping up of spending, eased banking regulations and extended state guarantees for corporate borrowing, foreign investors poured money into the country, helping to drive the stock market nearly two-thirds higher.
Turkish banks, meanwhile, increasingly gambled by borrowing short-term funds overseas to fund their growing domestic lending, a profitable trade until investors soured on the country's prospects and the lira began sinking in May.
The result has been a vicious cycle of collapsing confidence driving the currency down and pushing the government to change course or seek international help - something it so far is resisting.
Alarmed at the prospect that Turkey will face trouble financing its trade and budget deficits - and with rising US interest rates offering better returns elsewhere - investors now are fleeing. The lira fell 14 per cent Friday, accentuating a decline that began earlier this year.
"Everybody runs for the doors at the same time," said Andrew Kenningham, chief global economist for Capital Economics in London.
Turkey had already been hit hard by the global US tariffs that Trump imposed in March. The United States is the Turkish steel industry's top customer, with mills last year selling nearly 11 per cent of their exports, particularly reinforcing bars used in construction, to American buyers.
So far this year, the value of Turkey's shipments to the United States are down 49 per cent, according to the International Trade Administration.
In March, the International Monetary Fund warned that the Turkish economy was "showing clear signs of overheating" amid overly loose monetary policy.
Prices are rising at an annual rate of nearly 16 per cent. But under a new constitution that gave him expanded power, Erdogan has sole authority over naming central bank officials, and he has insisted on keeping rates low. In July, Erdogan appointed his son-in-law, Berat Albayrak, minister of finance, replacing a former Merrill Lynch executive who had investors' confidence.
"The people in charge in Ankara don't know what they're doing," said economist Jacob Funk Kirkegaard of the Peterson Institute for International Economics.
