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Trump's tariff tweet inflames Turkey's economic crisis and strained USA relations

Trump's tariff tweet inflames Turkey's economic crisis and strained USA relations

US President Donald Trump dramatically increased the pressure on Turkey on Friday, threatening to double tariffs on the country's aluminium and steel exports, leading to a fresh slump in the already tumbling lira.

The final gut punch to the lira came after Erdogan's speech, when Trump tweeted that he had "just authorized a doubling of tariffs on steel and aluminum with respect to Turkey".

Alan Madison, a spokesman for Borusan Mannesmann's U.S. subsidiary, said the company and its Turkish parent were still studying Trump's new proposal and declined to comment further.

The New York Times suggested that Trump could also be trying to offset the effects of Turkey's weakened currency on the existing tariffs.

But the haemorrhaging reached an unprecedented intensity in the last weeks as Turkey's ties with the United States strained further and markets questioned their trust in Turkish policymakers, pushing the currency to five against the dollar.

Turkey is now under a 25 percent tariff on imported steel and 10 percent on aluminum, which went into effect in March.

A widening rift with the United States, its main North Atlantic Treaty Organisation ally, and President Tayyip Erdogan's grip on monetary policy under a new powerful executive presidency have helped to drive the lira down by more than 40 percent this year, a particular vulnerability for Turkish banks as over a third of their lending is in foreign currencies.

"Those who have dollars, euros or gold under their pillows should go and exchange them into [Turkish] lira".

"Turkish markets continue to spiral downwards with the lira now in a full blown currency crisis. i nvestor confidence in President Erdogan's regime has been waning for much of the past year but key cabinet changes made after the June 24th elections have been particularly damaging for sentiment".

Turkish President Tayyip Erdogan told a rally Friday that his country would not yield to what he called bullying and blackmail. "Hopefully we will overcome this disaster and we will also successfully overcome this economic war", Erdogan said.

Washington has demanded the pastor's release and last month imposed financial sanctions on two Turkish ministers. Trump and Vice President Mike Pence threatened on July 26 to impose sanctions on Turkey if the pastor is not set free and allowed to return to the United States.

The president has declared that American importers' reliance on foreign metals poses a national security risk to the USA, and he also has increased the cost of these imports on Japan, Turkey and members of the European Union, the paper reported. Rate increases are the central bank's main tool to support the currency and fight inflation. The plunge in the value of the currency coupled with an inflation rate of almost 16% could cause a lot of damage to Turkey's economy. The president, who says a shadowy "interest rate lobby" and Western credit ratings agencies are attempting to bring down Turkey's economy, appealed to his countrymen's patriotism.

USA stocks fell Friday amid the geopolitical concerns that pushed the Turkish lira to the record low against the dollar.

"Don't forget, if they have their dollars, we have our people, our God", he said.

New Finance Minister Berat Albayrak - Erdogan's son-in-law - rolled out the government's new economic plan on Friday, promising central bank independence and tighter budget discipline, but giving few details to reassure investors. The U.S. exported $9.75 billion worth of goods-mostly cotton, scrap iron, steel, civilian aircraft parts, coal, and petroleum gases-to Turkey, and imported $9.42 billion worth of goods from them.

The tensions with Washington have, for investors, underscored Turkey's authoritarian trajectory under Erdogan. The currency has fallen more than 40 per cent this year, fanning worries about a full-blown economic crisis.