Trade Dispute Between US and Turkey Escalates

Andrew Cummings
August 16, 2018

In return, President Recep Tayyip Erdogan signed a decree to raise tariffs on American imports including cars, alcohol and tobacco.

"Qatar has pledged $15 billion of direct investments in Turkey", tweeted Ibrahim Kalin after President Recep Tayyip Erdogan met with Sheikh Tamim bin Hamad al-Thani, Qatar's emir, in the capital Ankara.

Erdogan also moved to strengthen ties with Germany, Turkey's biggest economic partner by far, accounting for about 37 billion euros ($42 billion) in bilateral trade previous year. "We have other partnerships and alternative markets".

It total, companies have US$217 billion in net foreign-exchange debt, equal to about a quarter of gross domestic product, according to central bank data.

The war of words between Turkey and the United States has escalated significantly in the past week as the USA calls for the release of an American evangelical pastor.

Image Zoom
Image Zoom

The lira continued its recovery against the dollar on Wednesday as Turkey increased tariffs on USA goods and introduced measures to restrict bets against the embattled currency. He suggested Turks would buy local or Korean phones instead, although it was unclear how he meant to enforce the boycott.

Finance Minister Berat Albayrak assured worldwide investors on Thursday that Turkey would emerge stronger from its currency crisis, insisting that the country's banks were healthy and strong.

Also helping was Turkey's decision to release two Greek soldiers from prison on Tuesday, increasing prospects for improved relations with the European Union.

Fundamental concerns about the economy persist, however. Global investors have been put off by the country's high levels of foreign debt and Erdogan's refusal to allow the central bank to raise interest rates to support the currency. Higher rates would slow economic growth, which he wants to egg on, but are urgently needed to support the currency and tame inflation, experts say.

The collapse, which intensified this month and triggered contagion that spread across emerging markets, is making it much more costly for businesses to refinance at least US$16 billion in bonds denominated in foreign currencies that are due by year-end, according to calculations by Bloomberg.

Albayrak addressed thousands of investors in a teleconference on Thursday to update about the state of the economy.

The feud escalated into an economic battle with global consequences this week as the Turkish currency, the lira, plummeted in value over fears of the country's economic stability stemming from the harsh USA sanctions.

"The tariffs that the United States placed on Turkey were out of national security interests".

Washington imposed sanctions and tariffs over the continued detention of an American pastor, while Turkey retaliated with some US$500 million of tariffs on some USA imports and said it would boycott USA electronic goods. A lower court already turned down his lawyer's request to free him and the US has said it won't negotiate until he's released. Brunson's lawyer told CBS News that a higher court was still considering the appeal and could overrule that decision.

The evangelical pastor, who is originally from Black Mountain, N.C., has lived in Turkey for 23 years and led the Izmir Resurrection Church.

Moves by the central bank to ensure Turkish banks have liquidity and a planned conference call by Turkish Finance Minister Berat Albayrak, who is Erdogan's son-in-law, on Thursday have gone some way to reassuring investors.

The plight of the American pastor, Andrew Brunson, has dominated the Trump administration's strategy toward its North Atlantic Treaty Organisation ally, even as the dispute roiled currency markets.

For its part, Turkey would like to see the extradition of Fethullah Gulen, who now lives in Pennsylvania. Brunson is accused of backing a 2016 coup attempt against Erdogan, which Brunson denies. The two countries fell out during the election over Berlin's refusal to let Turkish politicians campaign on German soil.

She said the USA was "monitoring the situation".

That's because the U.S.' main ally on the ground in Syria is the Kurdish YPG, a group Turkey considers a terrorist organization.

The pastor is at the center of an escalating spat between the USA and Turkey.

Other reports by iNewsToday