- Turkey has announced increased tariffs on U.S. products, raising duties on American booze to 140 percent, cars to 120 percent and tobacco to 60 percent.
- The government claims it is responding to a "deliberate attack" by the U.S. on Turkey's economy, which is in the midst of a currency crisis that economists say was triggered by flawed monetary policy.
- Tariffs on rice, cosmetics and coal will also be doubled, and Turkish President Recep Erdogan has urged his citizens to boycott U.S. electronic goods.
According to local press, the move doubles tariffs on a number of U.S. products, raising duties on American booze to 140 percent, cars to 120 percent and leaf tobacco to 60 percent.
The measures comes amid Turkey's currency crisis, which has seen the Turkish lira tumble more than 40 percent against the dollar since the start of this year. The government has called it a result of "economic warfare" on the part of the U.S., while economists point to Turkey's flawed monetary policy, widening current account deficit and high foreign-denominated debt as the primary cause of its economic woes.
Tariffs on rice, cosmetics and coal will also be doubled, and Turkish President Recep Erdogan has urged his citizens to boycott U.S. electronic goods, including Apple's iPhone, in favor of Samsung and local brands.
Meanwhile, the lira is firming up against the dollar following the start of a rebound Tuesday, trading at 6.0750 to the greenback on Wednesday at 10:30 a.m. Istanbul time (5:30 a.m. ET), up from its record low of 7.24 on Monday.
The lira tanked after President Donald Trump's announcement of sanctions and tariffs on Ankara last week over its continued detention of American evangelical pastor Andrew Brunson. Brunson has been held in Turkey since 2016 on charges of spying and involvement in the county's failed coup that year, which he and the U.S. government deny.
Trump issued sanctions on Turkey's justice and interior ministers earlier this month, and meetings between delegations of the two countries have failed to produce a diplomatic solution. On Friday the American leader tweeted that he would double tariffs on Turkish steel and aluminum, which Erdogan called "a stab in the back." The following three days saw the lira lose 30 percent of its value.
Turkish and foreign businesses operating in the country have called for diplomacy as their operations are hit by the ongoing turmoil.
In a letter published Tuesday, the Turkey-U.S. Business Council (TAIK), which represents 40 of the largest U.S. companies from a range of industries in Turkey, wrote, "We are truly saddened to see the tensions escalating with reciprocal statements on sanctions," and called on presidents of both states to "work on current problems through diplomatic channels and through mutual respect and dialogue rather than threats and sanctions."
While Turkey's currency is seeing a mild recovery, analysts say it will not be stabilized unless the country's central bank raises interest rates to cool an overheating economy and temper inflation of more than 15 percent, well above the central bank's 5 percent target.
Erdogan has consistently railed against raising rates in favor of faster growth, reinforcing investor worries over the central bank's independence. The severely weakened currency means Turkish corporates will struggle to repay their large volumes of foreign-denominated debt, raising the risk of insolvency.
Two major business bodies, the Union of Chambers and Commodity Exchanges of Turkey and Tusiad, the Turkish Industry and Business Association, demonstrated a rare show of dissent toward Erdogan's policies, issuing a joint statement on Wednesday saying that "tighter monetary policy is required in order to stabilise exchange rates."
Turkey's central bank last raised rates on June 7th, hiking its benchmark interest rate 125 basis points to 17.75 percent.
The statement also called for closer ties with the European Union, austerity measures over government spending, and an end to the spat with the U.S. "so that the situation doesn't make permanent damage to the real economy."
In a country where business interests have close ties to the government, the missive revealed the extent of the business community's fears over the current situation.
Relations between Washington and Ankara have been souring for months, exacerbated by divisions over Syria policy, Iran sanctions, Turkey's purchase of a Russian weapons system alongside American F-35 jets, and Erdogan's warming relations with Russian leader Vladimir Putin.