Turkish lira plunges as US trade war measures strangle Turkish economy
Alex Lantier and Halil Celik
11 August 2018
Turkey’s currency fell 16.2 percent yesterday against the US dollar, as US President Trump threatened to strangle its economy by blocking its exports to the United States with high tariffs.
On Twitter, Trump wrote: “I have just authorized a doubling of Tariffs on Steel and Aluminium with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will be 20 percent and Steel 50 percent. Our relations with Turkey are not good at this time!”
The fall of the lira and the closing of US markets to Turkey’s metal exports threaten to slash Turkish jobs and devastate its economy. In 2017, Turkey sold 1.5 million tons of steel to the United States, its largest steel export market. Much of Turkey’s foreign debt was reduced in value when the lira traded at less than two to the US dollar. Since it now trades at 6.62 lira to the dollar, the cost in lira of buying imports and of servicing Turkey’s roughly US$453 billion in outstanding foreign debt has exploded.
The euro and major stock markets fell amid concern of a new financial crash possibly starting in Turkey. The European Central Bank is monitoring several major European banks they say are heavily exposed to Turkish debt, including Spain’s BBVA, Italy’s UniCredit and France’s BNP Paribas. Spanish, French and Italian banks have loaned Turkey $83.3 billion, $38.4 billion and $17 billion, respectively.
As the lira’s collapse accelerated in recent days, becoming the world’s worst-performing currency, Turkish President Recep Tayyip Erdogan turned to Russia and China for aid. On Wednesday, he announced that Turkey will issue so-called…