Tensions soar as US imposes tariffs against Turkey as the lira continues to plummet

Relations between the US and Turkey have deteriorated further this week as US President Donald Trump raised tariffs against Turkish aluminium to 20% and to 50% in terms of steel.

Trump stated in an inflammatory tweet that the Turkish lira was weak against “our very strong dollar”, adding that “US relations with Turkey are not good at this time.”

The currency, which traded 4.7 to the dollar a month ago, has now weakened to 6.4 to the dollar, having lost more than 30% of its value this month, 20% of which accrued in the last 24 hours. Turkey’s national tender has already fallen more than 40% in the past year, and this is the first time ever that it took more than 6 lira to buy a dollar.

Turkish President Recep Tayyip Erdogan said in a speech that the drop was part of a “campaign” led by foreign powers against the nation.

Turkey also warned there would be retaliation against the US’ imposition of the tariffs.

“The United States should know that the only result such sanctinos and pressure will bring… will be harming our relationship as allies,” the Turkish foreign ministry said in a statement.

The two Nato members are at odds on a number of issues  - how to fight the Islamic State group, Ankara’s plans to buy Russian missile defence systems, and how to punish the alleged plotters of a failed coup in Turkey in 2016. 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.      

International tension has sharply inclined under the threat of economic instability throughout the region.

While Turkey’s economy is only the 17th largest in the world, there are a number of concerns that Trump’s latest trade war is only further disrupting global commerce, damaging longtime alliances, and threatening global economic growth.

In addition, foreign investors are disquieted by Erdogan’s authoritarian government, which seems to be pursuing imprudent and politically charged economic policies which undercut the independence of the central bank – only worsening Turkey’s economic predicament.         

Erdogan has further attempted to bolster the nation against this “economic war”, calling for citizens to exchange foreign currency and gold for lira as part of the “domestic and national struggle”.

Asli Aydintasbas, senior fellow with the European Council on Foreign Relations, stated that Erdogan’s speech “was clearly defiant”, but Turkey’s economic situation continues to appear ever more dire.