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U.S. tariffs hike adds to Turkey's economic problems

12 August 2018

The currency's drop - 41 percent so far this year - is a gauge of fear over a country coming to terms with years of high debt, worldwide concern over President Recep Tayyip Erdogan's push to amass power, and a souring in relations with allies like the U.S.

Relations between Washington and Turkish President Recep Tayyip Erdogan also have worsened because of the detention of three locally employed United States consular workers, trade matters and differences over Syria.

In relation to this latter dispute, Turkey's continued detention of American pastor Andrew Brunson, who was jailed 21 months ago in a widespread crackdown over a failed coup in Turkey, has increase hostility between the nations.

In a separate opinion piece in the Turkish newspaper Daily Sabah, Erdogan's spokesperson Ibrahim Kalin said Turkey's efforts to solve the crisis with diplomatic methods have been dismissed by the White House, warning that Washington might completely lose them as an ally.

Investors have become increasingly concerned with the faltering Turkish economy, its central bank's willingness to respond to the downturn and the impact it could have on global financial markets, according to multiple reports.

The lira sell-off deepened concern over whether over-indebted Turkish companies will be able to pay back loans taken out in euros and dollars after years of overseas borrowing to fund a construction boom under Erdogan.

"It is wrong to dare bring Turkey to its knees through threats over a pastor".

Erdogan said Turkey acted in accordance with the law, saying: "We have not made concessions on justice so far, and we will never make any".

"If some of these vulnerabilities crystalize they could tip the economy into a full blown crisis", said its economist Yasemin Engin. Given the ultra-loose monetary policy in the U.S. and Europe and the giant asset purchase schemes stemming from United States and eurozone quantitative easing, investors were moved to seek higher returns in Turkey and other emerging markets. What possible reason could there be behind the lira which was at 2.8 against dollar in July 15, 2016 to slide below 6 yesterday?

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Some community activists were concerned that this year's heavy police presence could be a counterproductive overreaction. Heather Heyer , 32, was killed at last year's rally after James Alex Fields Jr. struck her with his vehicle.

Trump further frayed US-Turkish relations after the president announced via Twitter that he was doubling of tariffs on exports of steel and aluminum from the North Atlantic Treaty Organisation ally, shoving the Turkish lira down 18% in one day alone to a record low against the US dollar.

A Turkish delegation visited Washington for talks this week but left with no signs of a breakthrough.

His tone echoed that of a speech given on Thursday when he told supporters that "if they have dollars, we have our people, our righteousness, and our God". He tweeted, "Our relations with Turkey are not good at this time!".

"The US runs the risk of losing Turkey as a whole".

The lira has lost more than 40 percent this year.

President Recep Tayyip Erdogan also said that Turkey would prepare to trade with its key partners in local currencies so that it and its allies would not be dependent on the dollar.

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Washington in response sanctioned two Turkish ministers and Trump on Friday announced it was doubling the tariffs on steel and aluminium imports from Turkey, saying relations with Ankara were "not good at this time".

Turkey's economy is only the 17th largest in the world, but its problems are worsening as Donald Trump's trade war is rattling global commerce, damaging longtime alliances and threatening economic growth worldwide.

"The US and Turkey are breaking up".

U.S. tariffs hike adds to Turkey's economic problems