Trump doubles tariffs on Turkish metals

Stocks dive, euro falls, as Turkey turmoil ripples out

Turkish President Recep Tayyip Erdogan said Turks should not be alarmed by exchange rate movements.

Aluminium will now be 20 per cent and Steel 50 per cent.

The stakes rose sharply Friday morning when President Trump vowed to double metal tariffs on Turkey.

As the currency weakens, it can make foreign investors pull their money out of Turkish stocks and bonds as their lira investments lose value.

Donald Trump has today announced massive increases to tariffs against Turkey as its currency the lira continues to plummet. Minutes before Ankara learned about the higher tariffs, the lira had already hit an all-time low of 6.87 against the dollar.

Trump tweeted that he had authorized the doubling of steel and aluminum tariffs "with respect to Turkey". On Friday, he said the country had to take steps in answer "to those who have waged an economic war against us". Trump also threatened additional "large sanctions" against Turkey, a North Atlantic Treaty Organisation ally, for Brunson's detention.

Our relations with Turkey are not good at this time!

Prior to Trump's announcement, the Turkish lira fell to its lowest point ever against the US dollar on Friday. The Eurozone is particularly exposed - the European Central Bank is anxious about non-hedged exposure of European banks to Turkish companies and if Turkish banks fail, there's no question that it will affect markets around the world.

The Russian ruble this week plummeted to its lowest level against the dollar since 2016 as the United States said it was imposing more sanctions on Moscow over a chemical attack in the UK earlier this year. In any case, economists warn that with the row with the United States injected into the mix, it will take far more than an increase in interest rates to reverse the downward trajectory of Turkey's once robust economy.

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Erdogan downplayed the currency crisis in a speech on Friday, advising Turks not to be anxious over exchange rate fluctuations.

It argued that the country accounted for less than 2 percent of group revenues and a 10 percent fall in the lira would affect its CET1 ratio - capital that must be set aside as a buffer against financial shocks - by only around 2 basis points.

Trump announced the action Friday on Twitter. The country's politics are also a problem with the President's son-in-law as Finance Minister and perception of political interference with the "independent" Central Bank.

Markets are deeply concerned over the direction of domestic economic policy under Erdogan with inflation at almost 16 per cent but the central bank reluctant to raise rates in response.

He also said increasing production, exports and employment was the best response to the country's challenges.

An important emerging market, Turkey borders Iran, Iraq and Syria and has been mostly pro-Western for decades. But experts argue that the central bank should instead raise interest rates to ease inflation and to support the currency.

Erdogan said during an address to supporters: "Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks".

The timing of Mr Trump's tweet coincided with an announcement by Turkey's Treasury and Finance Minister Berat Albayrak of the government's new economic policy which is aimed at restoring confidence in the lira.

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