Higher US tariffs increase pressure on Turkish economy

President Erdogan has tried to reassure citizens as the currency has fallen

Trump announced the action Friday on Twitter.

President Donald Trump abruptly announced Friday that he would double the rate of import tariffs on Turkish metals - forcing Turkey to ask citizens to buy its own crashing currency.

A "gigantic rate hike" of at least 500 basis points to calm markets and a clear commitment from the Central Bank of Turkey to support the currency could help halt the decline, Hordijk said, adding, "Another bandage to stop the lira from bleeding to death would be capital controls, but Erdogan opposes these measures".

It had been billed as a state visit that would patch up frayed ties between two North Atlantic Treaty Organisation allies and potentially serve as a platform for Turkey to make overtures toward Europe after months of strained relations.

"Aluminum will now be 20 percent and Steel 50 percent".

As investors piled into "safe" bonds, German yields hit three-week lows and yields on US 10-year Treasuries fell to 2.8913 percent.

The Turkish lira fell against the United States dollar due to mounting tensions between Turkey and the U.S. in the wake of Ankara's refusal to release American pastor Andrew Brunson who is suspected of being involved with a terrorist group.

Erdogan added that Turkey was not afraid of "threats" and said it had many alternative sources of economic cooperation "from Iran, to Russian Federation, to China, and some European countries".

Indeed, through Thursday, the Turkish lira had lost 32 percent of its value against the dollar just since the beginning of the year.

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Turkish newspaper Hurriyet and other media reports quote Erdogan as making the comment to a group of worshippers following traditional Muslim Friday prayers during a visit to the northern city of Bayburt.

The United States, the world's biggest steel importer, imposed tariffs of 25 percent on steel and 10 percent on aluminum in March for imports from a variety of countries.

Minutes before Ankara learned about the higher tariffs, the lira had already hit an all-time low of 6.87 against the dollar.

Meanwhile, investors are anxious about the economic policies of President Recep Tayyip Erdogan, who won a new term in office in June with sweeping new powers.

The two countries are also divided over the detention of three locally employed US consular staff, Washington's sanctions on Iran, Turkey's plans to buy a Russian missile defense system, and their military interventions in Syria. The lira fell further after Mr Trump's tweet. "This is a domestic and national struggle", Erdogan said according to CNBC.

President Trump seems to think that Turkey has been trying to take advantage of us by having an economic crisis that's sent their currency tumbling.so he's taken steps to make it tumble even more?

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. Inflation increased 16 percent in July, and Erdogan has insisted that interest rates not increase.

An artificially low interest rate environment has contributed to additional ongoing pressures on the Turkish lira.

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