Turkey's president: United States waging 'economic war' against Turkey

Labourers work at a steel market in Shanghai

The U.S.is the biggest importer of Turkish steel, and on Friday President Donald Trump said he will authorize higher tariffs on steel and aluminum from Turkey, a North Atlantic Treaty Organisation ally.

The plunge in the Turkish lira could not have come at a worse time.

On Friday the currency dropped as much as 18 percent at onepoint, the biggest one-day fall since a 2001 financial crisis inTurkey.

Fears over contagion even pushed global equity markets lower, with some European banks coming under heavy selling pressure due to their exposure to Turkey.

UBS chief economist for EMEA emerging markets Gyorgy Kovacs said a giant rate hike of 350-400 basis points would be "consistent with real rate levels that in the past helped to stabilise the currency" but warned a deal to normalise ties with the United States may also be needed.

Announcing that aluminium tariffs will rise to 20 per cent and steel tariffs to 50 per cent, Trump said on Twitter that USA relations with Turkey "are not good at this time", and seemed to gloat at the country's misfortunes.

On Friday, as the Lira plunged and the US imposed its higher sanctions on Turkey, Turkish President Erdogan and Russian President Vladimir Putin spoke on the phone.

In 2017, 19 billion dollars worth of goods were traded between the US and Turkey. Financial upheaval there risks further destabilising an already volatile region.

He did not offer an explanation for the tariff hike, which raises the tariffs to 20 percent on aluminum and 50 percent on steel, though there are a couple of possibilities.

Turkey's supreme leader is also clearly angry that the United States has not taken more action against the Gulenist movement and what he said was a failure "to unequivocally condemn" the 2016 coup attempt.

Erdogan said high foreign exchange rates were being used as a weapon against Turkey. In the past, Trump has threatened to impose trade barriers on countries that deliberately push down the value of their currencies, so as to make their goods cheaper for American consumers (and thus, more competitive than the wares of US manufacturers).

"We will not lose the economic war", state-run TRT Haber TV quoted Erdogan as saying, according to Agence France-Presse.

Mr Erdogan yesterday repeated a call to Turks to help support the lira to win what he described was a "war of independence".

Trump last month threatened to slap "large sanctions" on Turkey if it did not release American pastor Andrew Brunson, who faces charges of espionage for allegedly supporting a failed coup attempt in 2016.

The contagion of instability from Turkey into Europe may extend beyond the financial, should the country decide to or find itself no longer able to keep up with its end of the EU-Turkey agreement to stop the flow of Middle Eastern migrants across the Mediterranean into Greece, resulting in a second migrant crisis.

"If there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks", he said during an address to supporters. Gulen denies the allegation. Henri Barkey, a professor of International Relations at Lehigh University, the tariffs "an unnecessary escalation" and advised direct talks between Mr Trump and Mr Erdogan.

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