Higher US tariffs increase pressure on Turkish economy

Turkish delegation returns home after meeting in US

Turkish lira plunges as President Erdogan tells citizens to sell foreign currency amid 'economic war'

"Aluminum will now be 20 percent and Steel 50 percent", he said in a Twitter post.

This is double the level the president imposed on a range of countries earlier this year, including European Union member states. The U.S. was Turkey's biggest export market for steel past year, though exports have fallen since.

Last week, the U.S.

President TrumpDonald John TrumpKobach agrees to recuse himself from vote counting in Kansas GOP primary NFL players kneel during national anthem before first preseason game Schiff blasts GOP for Russian Federation probe conduct: "That's how you obstruct an investigation, not how you conduct one" MORE said Friday that the USA will also double tariffs on steel and aluminum imported from Turkey as relations between the North Atlantic Treaty Organisation allies worsen.

European and emerging-market equities bore the brunt of selling, with losses of more than 1 percent after the US escalated a diplomatic row that tipped Turkey's economy deeper into crisis. With interest rates still judged too low in Turkey that difference is already quite narrow at about 2.0%. if it falls to zero or lower bondholders will be losing money.

Not only have Turkish bonds themselves fallen by 20% in value due to soaring inflation but the Lira has also devalued 28% further doubling down on the loss from the bond-price decline with a further loss from the FX depreciation.

"Their currency, the Turkish lira, slides rapidly downward against our very strong dollar!"

The Turkish lira is in a state of crisis, as a result of investor confidence in Turkish assets remaining at alarmingly low levels.

The currency's drop - 41 per cent so far this year - is a gauge of fear over a country coming to terms with years of high debt, global concern over President Recep Tayyip Erdogan's push to amass power, and a souring in relations with allies like the U.S.

Turkey's benchmark one-week repo rate is now 17.75%. But some investors fear the Turkish economy is growing too quickly and could face problems.

The latest escalation came as Turkey's Economy Minister Berat Albayrak, who is Erdogan's son-in-law and a trusted lieutenant, unveiled what was touted as a new economic plan, pledging Central Bank independence, tighter budget discipline and sustainable and healthy growth. He is a fierce opponent of higher interest rates, and backed a wave of fiscal stimulus in the run-up to his re-election in June.

The lira has been under sustained pressure on foreign exchanges, dropping by nearly 50% against the dollar in the past 12 months.

Trump is also declaring that, "Our relations with Turkey are not good at this time!"

One of the hard issues affecting U.S. Trump, who had secured the release of a Turkish woman activist being held by Israel and just days earlier he had been exchanging fist bumps with Erdogan at a North Atlantic Treaty Organisation summit in Brussels, took it as a personal affront.

Brunson, an evangelical Presbyterian from North Carolina, was jailed for allegedly supporting a group that Turkey blames for the failed coup and was moved from prison to house arrest in July.

The United States imposed sanctions on two Turkish officials earlier this month over a detained American pastor who is being tried on espionage and terror-related charges.

The Turkish lira hit an all-time low against the dollar on Friday, and there are growing concerns that the country's economic troubles could spread to the eurozone.

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