Turkey Shaken by Financial Fears

A financial shockwave ripped through Turkey on Friday, when its currency nosedived on concerns about its economic policies and a dispute with the US, which President Donald Trump stoked further with a promise to double tariffs on the NATO ally.

The lira tumbled 14% in one day, to 6.51 per dollar, a massive move for a currency that will make the Turkish poorer and further erode international investors’ confidence in the country, AP reported.

The currency’s drop—41% so far this year—is a gauge of fear over a country coming to terms with years of high debt, international concern over President Recep Tayyip Erdogan’s push to amass power, and a souring in relations with allies like the US.

The diplomatic dispute with the US was one of the triggers that turned market jitters into a full-blown route this week. Turkey has arrested an American pastor and put him on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago. The US responded by slapping sanctions on Turkey and threatening more.

And Trump took advantage of Turkey’s turmoil on Friday to turn the screws on the country. He tweeted that he had authorized the doubling of steel and aluminum tariffs “with respect to Turkey”.

Trump said the tariffs on aluminum imports would be increased to 20% and those on steel to 50% as the Turkish lira “slides rapidly downward against our very strong dollar”. “Our relations with Turkey are not good at this time!” he wrote.

The United States is the biggest destination for Turkish steel exports with 11% of the Turkish export volume. The lira fell further after Trump’s tweet.

In what appears to be a diplomatic riposte, Turkey later said Erdogan had held a phone call with Russian President Vladimir Putin to discuss economic ties. It did not disclose details, but suggests Turkey might gravitate further away from its NATO allies toward cooperation with Russia, whose relations with the West are at their lowest since the Cold War.

Meanwhile, economic crisis is deepening in Turkey and perhaps the most dramatic sign of it is the increase of businesses shut down, at least 38 a day, AFNNews reported.

According to Birgun newspaper reports, businesses going bankrupt are increasing at a dangerous speed since the beginning of the year. According to the report, 2,417 companies closed in January, while 682 in February, 780 in March, 623 in April, 652 in May and 752 in June.

All in all, in the first six months at least 5,906 companies have been shut.