The Turkish lira continued to plunge on the backdrop of US President Donald Trump's decision to double tariffs on steel and aluminum imports from Turkey to 50 and 20 percent respectively. Meanwhile, Ankara announced its rejection of the resolution, insisting it would reciprocate.
The new US tariffs on Ankara are against the rules set by the World Trade Organization (WTO), Turkey's Trade Ministry said on Friday.
The Ministry issued a statement asserting that Turkey, as it determines and implements its own trade policy in compliance with the WTO, expects other member countries to comply with international rules.
"We will continue to support our iron, steel and aluminum exporters by defending their interests against illegal practices of other countries on every international platform, especially WTO," it said.
The ministry however, noted that US will continue to be Turkey’s important trading partner.
"The real losers of decisions taken by the US administration are producers, private sector, and exporters of both countries," the statement concluded.
Turkey's iron, steel and aluminum exports to the US were $1.1 billion in 2017, while Turkey's imports from the US were worth $1.3 billion in 2017, the ministry added.
On Friday, Trump issued a tweet on his official account saying he has 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!”
At the end of a "tragic day", Turkish lira lost 20 percent of its value, the biggest one-day fall since a 2001 financial crisis in Turkey.
Turkey’s trade minister Ruhsar Pekcan on Friday urged the US President to return to the negotiating table on tariffs, saying the trade rift between the NATO allies can and should be resolved through dialogue.
“Repeated efforts to communicate to the US administration that none of the stated criteria driving America’s tariffs are applicable to Turkey have thus far proven fruitless,” Pekcan said in a statement.
“Nevertheless, we implore President Trump to return to the negotiating table – this can and should be resolved through dialogue and cooperation,” he added.
US imports of Turkish steel account for 4 percent of total steel imports, according to statistics from 2017.
Last week, Washington and Ankara exchanged sanctions against the interior and justice ministers.
A meeting between senior diplomats from the two countries on Wednesday in Washington did not produce significant progress to ease tensions over the trial of US pastor Andrew Brunson in Turkey on charges of supporting terrorism and espionage.
On Friday, Erdogan called on Turks to ignore forex developments in the Turkish lira and asked citizens to sell their gold and US dollars to support the country’s currency.
Speaking in the northeastern province of Gumushane, Erdogan repeated his call to sell dollars to support the lira. “Those who think they will make us kneel via economic manipulation do not know us at all,” he said.
In the speech broadcast by state-owned TRT Channel, Erdogan called lira's tumble a "currency plot," noting that "those who move the currency think that they can destroy Turkey."
Istanbul Chamber of Industry on Friday called for urgent measures to cushion the potential damage of a free-falling lira on real sector, saying the fluctuation has turned into a source of financial instability.
Meanwhile, concerns of the US-Turkey spat went beyond Turkey’s borders as Financial Times reported that the European Central Bank (ECB) has become concerned about the exposure of some of the currency area’s biggest lenders to Turkey in light of Turkish lira’s dramatic fall.
In the context of the impact of the Turkish crisis, Euro sank to its lowest levels in over a year on Friday, as worried investors scrambled towards safe currencies such as the dollar, the yen and the Swiss franc.
European stocks closed sharply lower on Friday amid fears that problems in Turkey could infect other eurozone countries. The Stoxx Europe 600 finished down 1.1 percent pushing the index about 0.9 percent lower for the year.
On Friday, Treasury and Finance Minister Berat Albayrak rolled out the government’s new economic plan, promising central bank independence and tighter budget discipline, but giving few details to reassure investors and stem a widening currency crisis.
Albayrak gave a presentation to business leaders in Istanbul promising structural reform, economic re-balancing, and “sustainable and healthy growth.”
“The independence of the central bank is extremely critical for our economy,” said the minister.
The new set of economic steps are aimed at securing an economic growth of 3-4 percent in 2019, and decreasing the inflation rate to single digits, the Ministry of Treasury and Finance said in a press release on Aug. 9.
