Turkey escalates U.S. feud by increasing tariffs on products

Randal Sanchez
August 15, 2018

The Turkish lira TRYTOM=D3 has lost more than 40 percent of its value against the dollar this year, hit by worries over President Tayyip Erdogan's calls for lower interest rates and fraying ties between the United States and Turkey, a North Atlantic Treaty Organisation ally.

The development on Wednesday comes amid escalating tensions between Turkey and the United States, its North Atlantic Treaty Organisation ally. "If [the US] has the iPhone, there's Samsung on the other side", Erdogan was reported as saying.

"There is a cost for those who are plotting the operation" against Turkey, he said in televised remarks from Ankara, without specifying when the boycott would start or how it would be enforced.

"Surely, Moscow might be happy to exploit this crisis especially as calls for boycotting iPhones could easily escalate to demands for reduced military cooperation, for example, with regard to Incirlik [Air Base] or other US-NATO facilities in Turkey at a time when Washington still doesn't have an ambassador there".

Ankara has sharply increased tariffs on certain USA imports, some of them more than double, in response to Washington's "deliberate attacks" on the Turkish economy amid a widening dispute between the two North Atlantic Treaty Organisation allies.

A plunge in the Turkish lira has set off a wave of selling across emerging market assets, reviving fears of contagion that has been the sector's Achilles heel for decades. Turkey regards the Kurdish fighters as terrorists.

For one more time, Erdogan called on Turks to convert US dollars into lira in order to "maintain the dignity" of the currency.

On Tuesday, however, the lira recovered some ground, trading at 6.4300 to the dollar at 1827 GMT, up 6.8 percent on the day, after plunging to an all-time low of 7.24 on Monday.

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"We (also) have our Venus and Vestel", he said about homegrown Turkish electronics brands.

Turkey has accused the United States of waging an "economic war" as part of a plot to harm the country.

Turkey is especially exposed, where non-bank borrowers - a broad group including government, households and most corporations - held US$195-billion in debt denominated in USA dollars at the end of a year ago, "or a stunning 23 per cent of [gross domestic product]", according to National Bank Financial.

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By contrast, Spanish, French and Italian banks have loaned Turkey $83.3 billion, $38.4 billion and $17 billion, respectively.

A weak lira makes life more expensive for people in Turkey by making imports more expensive.

While Erdogan didn't address their concerns in his speeches on Tuesday, he suggested Turks have already begun responding to his call to convert foreign exchange into lira because it would be tantamount to "surrendering" if they did otherwise. "The administration is going to stay extremely firm on this", the official said.

An American Christian pastor standing trial in Turkey on terrorism charges has appealed again to a Turkish court to release him from house arrest and lift his travel ban, his lawyer told Reuters on Tuesday.

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