Turkey ramps up US spat with huge tariffs on cars and other goods
by Jethro Mullen
August 15, 2018: - 2:03 AM EDT
CNN
Turkey on Wednesday intensified its clash with the United States, announcing heavy new tariffs on some American products including cars, alcohol and tobacco.
Turkish Vice President Fuat Oktay said on Twitter that the measures were in response to "the deliberate attack of the US administration on our economy."
The Turkish government has doubled its retaliatory tariffs on American cars to 120% and on alcoholic drinks to 140%, according to a notice published Wednesday. Other affected products include fruit, coal, paper and rice.
Relations between Washington and Ankara have rapidly soured in recent weeks over Turkey's detention of an American pastor. The Trump administration announced plans on Friday to double US tariffs imports of steel and aluminum from Turkey.
The political spat with Washington has added to pressure on Turkey's currency, the lira, which has plunged against the dollar.
Turkish President Recep Tayyip Erdogan has accused the United States of stabbing Turkey in the back and on Tuesday called for a boycott of US electronics products.
Turkey already imposed new tariffs in June on a similar range of US goods, worth a total of $1.8 billion, in retaliation for President Donald Trump's initial tariffs on steel aluminum.
-- Isil Sariyuce contributed to this report.
Turkey on Wednesday intensified its clash with the United States, announcing heavy new tariffs on some American products including cars, alcohol and tobacco.
Turkish Vice President Fuat Oktay said on Twitter that the measures were in response to "the deliberate attack of the US administration on our economy."
The Turkish government has doubled its retaliatory tariffs on American cars to 120% and on alcoholic drinks to 140%, according to a notice published Wednesday. Other affected products include fruit, coal, paper and rice.
Relations between Washington and Ankara have rapidly soured in recent weeks over Turkey's detention of an American pastor. The Trump administration announced plans on Friday to double US tariffs imports of steel and aluminum from Turkey.
The political spat with Washington has added to pressure on Turkey's currency, the lira, which has plunged against the dollar.
Turkish President Recep Tayyip Erdogan has accused the United States of stabbing Turkey in the back and on Tuesday called for a boycott of US electronics products.
Turkey already imposed new tariffs in June on a similar range of US goods, worth a total of $1.8 billion, in retaliation for President Donald Trump's initial tariffs on steel aluminum.
-- Isil Sariyuce contributed to this report.
[END REPORT]
Erdogan and Putin join against US - Lira fails to recover fully
By Simon Osborne
August 14, 2018
ANKARA and Moscow have joined forces to condemn Washington for imposing sanctions on their countries as the Turkish lira crisis threatens to spill over into an international financial crash.
Turkish Foreign Minister Mevlüt Çavuşoğlu said the White House-backed sanctions which sparked the currency’s dramatic collapse were shattering America’s reputation around the world.
Speaking at a joint press conference with his Russian counterpart Sergei Lavrov, Mr Çavuşoğlu said: “The era of bullying must end.
"If the US wants to continue being a reputable country, it cannot do so with these impositions.
"We are against the US or any country imposing sanctions.”
Mr Lavrov described the US sanctions against Turkey as "unlawful and illegitimate" and said they could not last for long.
[...]
All eyes have been on Turkey ever since after the collapse in the value of the lira threatened to spark a global cash crisis.
The beleaguered currency found a moment's respite at [its] rise 2.6 percent to 6.70 against the US dollar after the Turkish central bank pledged liquidity and cut reserve requirements for banks. But the currency has lost almost 10 percent of its value since yesterday and has shed more than two-fifths of its value so far in 2018.
So far the the contagion has hit mainly emerging markets, spreading to the South African rand and the Argentine peso. [Pundita note: and the Indian rupee]
Argentina's central bank surprised by raising interest rates by 5 percentage points on yesterday, but it was still not enough to stop the peso hitting a record low.
Fears of exposure of European banks to Turkey pushed up bond yields in Spain and Italy and hobbled the euro.
The single currency was last at $1.1421, having touched its lowest since July 2017 on Monday.
But Asian share markets fought to regain their footing as tremors from the collapse of the Turkish lira ebbed.
Matt Sherwood, head of investment strategy at Perpetual, said: "The more significant emerging market concern relates to the risk that regional underperformance becomes a source of disruption through swings in capital flows and currencies.
"While the focus at present is on Turkey where currency depreciation and rising rates has translated into a marked tightening of financial conditions, it could spread to Mexico, Brazil and India."
READ BELOW FOR LIVE UPDATES
7.11pm update: German think-tank's warning to Turkey
Clemens Fuest, head of Germany's Ifo Institute think-tank, has urged Turkey's government to tackle the economic crisis.
Mr Fuest said: "We have serious cause to worry. The crisis in Turkey is a classic economic and currency crisis.
"Erdogan's policies have been putting pressure on the country's economy for several years. The conflicts with the EU and the US are unsettling investors.
"Erdogan has responded with economic policy measures, especially in the form of state loan guarantees and very expansionary monetary policy.
"He put pressure on the central bank to cut interest rates, which undermined the independence of the central bank.
"In 2017, this led to high growth, but that was just a flash in the pan. Now it has burned out.
"The inflation rate has exploded, confidence is shaken."
3.44pm update: Pakistan attacks Washington's sanctions on Turkey
Pakistan's Foreign Ministry has sided with Turkey in its dispute with the US by attacking Washington's sanctions.
A spokesman said: "Pakistan, in principle, is opposed to the imposition of unilateral sanctions against any country.
"The solution to any and all issues should lie in dialogue, mutual understanding and goodwill."
Pakistan acknowledges and greatly appreciates Turkey's invaluable role towards regional and international peace and stability.
2.40pm update: 'We have serious cause to worry'
German economist Clemens Fuest, head of Berlin’s Ifo Institute, said there seemed little chance of Mr Erdogan regaining the confidence of the foreign markets.
Mr Fuest warned political and economic destabilisation of Turkey would be the last straw for Europe after Brexit, the transatlantic crisis and a looming global trade war.
He said: "We have serious cause to worry. The crisis in Turkey is a classic economic and currency crisis.
“Mr Erdogan's policies have been putting pressure on the country's economy for several years.
“The conflicts with the EU and the US are unsettling investors.
“Mr Erdogan has responded with economic policy measures, especially in the form of state loan guarantees and very expansionary monetary policy.”
2.20pm update: Turkish lira crisis 'will get worse before it gets better'
Economic experts do not believe the brief recovery of the embattled Turkish lira will bring an end to the threat of a global financial crisis and warn of worse to come.
Nick Brooks of asset management firm Intermediate Capital Group reckons things will get worse before they get better given Turkey’s weak economic position and has called for a sharp hike in interest rates to cool the overheating economy.
He said: “The fundamental problem in Turkey has been the build-up of unsustainable economic imbalances.
"Current account deficit is 6.3 percent of GDP, corporate foreign exchange debt is 35 percent of GDP and there's an inflation rate of 16 percent while the economy is now in a vicious downward spiral with the fall in the lira leading to concerns about corporate and financial sector solvency, further pushing down the currency and increasing capital outflows.
“Only a sharp hike in interest rates to halt capital outflows and incentivise inflows will halt the downward spiral.
“Capital controls, if implemented, will not be effective as Turkey needs foreign capital inflows to fund its current account deficit and to re-finance large foreign currency borrowing coming due this year.
“Investors will not bring new funds into the country if they don’t believe they will be able to get it back out.”
1.56pm update: Economist predicts possible bailout bid for struggling Turkey
Former International Monetary Fund official Miranda Xafa said Turkey will soon be struggling to repay debts issued in foreign currencies unless it seeks a bailout.
She said: “The longer it waits, the harder it will get to overcome the crisis and the bigger the cost in terms of lost output, inflation, and financial distress.”
1.38pm update: US official visits pastor at centre of diplomatic row
Jeffrey Hovenier, the US charge d’affaires in Turkey, has visited Pastor Andrew Brunson, who remains under house arrest in the ancient Aegean coastal city of Izmir, and repeated demands for his case to be resolved.
1.10pm update: Turkish firms drop US advertising campaigns
Turkey's national airline and its main telecoms firm are pulling all advertising from US media as the rift between the two countries continues to widen.
Flag carrier Turkish Airlines and Turk Telekom made their announcements after a campaign on Twitter calling for an end to advertising in US media outlets.
The airline’s senior vice president for media relations Yahya Ustun said: "We as Turkish Airlines are taking our place alongside our state and people.”
12.20pm update: Turkey condemns US over sanctions
Turkish Foreign Minister Mevlüt Çavuşoğlu and his Russian counterpart Sergei Lavrov have launched a withering attack on the US at a joint press conference in Ankara.
Mr Çavuşoğlu said America was damaging its own global reputation by imposing sanctions against Turkey and Russia while Mr Lavrov dismissed the Washington measures as "unlawful and illegitimate”.
11.04am update: Andrew Brunson files fresh appeal bid with Turkish court
US evangelical Christian pastor Andrew Brunson pastor - the man at the centre of the bitter diplomatic row beweetn Ankara and Washington - has appealed again to a Turkish court to release him from house arrest and lift his travel ban.
Relations between Turkey and the US have spiralled into a full-blown crisis over Mr Brunson, who was held for 21 months in a Turkish prison until his transfer to house arrest last month - a move Washington dismissed as insufficient.
The appeal document said the court should halt any unlawful political interventions and lift judicial control provisions imposed on Andrew Brunson.
10.20am update: Erdogan hits out at Trump and calls for US goods boycott
President Erdogan has made a defiant speech to an audience in Ankara.
He said: “We will boycott US electronic products.
“If they have iPhone, the other side has Samsung. In our country there is Venus, Vestel [the Turkish smartphone brands].”
And he warned America and Donald Trump: “There is a price we’re paying for the period we’re in.
“But there will be a price [which] those who’re waging an economic warfare against Turkey will also pay.”
The Turkish president added he would take a firm stance and said switching to foreign currencies would be “giving in to the enemy”.
9.29am update: White House repeats demands for Andrew Brunson's release
Washington has told Turkey the diplomatic row between the two countries will not end until US pastor Andrew Brunson is released from house arrest.
White House National Security Adviser John Bolton met Turkey’s ambassador to the US, Serdar Kilic, yesterday and insisted that Mr Brunson - who was arrested in 2016 and charged with espionage - must be immediately released.
Experts fear Turkey’s financial meltdown will not end until the stand-off between the two countries over Mr Brunson is resolved.
9.10am update: European shares bounce back
European markets have bounced back after two days of heavy selling as anxieties over contagion from the Turkish currency crisis appear to have eased slightly amid reassurances from Ankara’s central bank and government.
The Turkish lira improved after the central bank had pledged to guarantee liquidity in response to the meltdown which has unsettled global markets.
Banks were worst hit by concerns over Turkey, taking the pan-European STOXX 600 benchmark index to a 21-month low.
But Italy's FTSE MIB jumped 0.8 percent this morning with banks gaining as bond yields fell after the government said it had agreed to preserve the stability of state finances and lower public debt.
8:51am update: Turkish stock market rallies
Turkey’s stock market rallied this morning and was up more than 2 percent in early trading.
The initials gains mean most of yesterday’s heavy losses have been clawed back.
8.41am update: Turkish lira recovers some ground
The Turkish lira has risen by around 5 percent to take it back to 6.5 against the dollar from over 6.88 last night.
Analysts said it could mean investors are recovering their nerve but warned the lira remains in a precarious place bearing in mind it was worth 3.7 to the dollar at the start of the year.
[END REPORT]
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