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UPDATE 1-U.S. terminates Turkey's preferential trade agreement but reduces tariffs on steel

tariffs on steel@ (Updates with more details on the White House statement, tariff reduction move, background)

WASHINGTON, May 16 (Reuters) - The United States on Thursday terminated Turkey's preferential trade treatment under a program that allowed some exports to enter the country duty free, but it has halved its tariffs on imports of Turkish steel to 25%.

The White House said it was appropriate to terminate Turkey's eligibility to participate in the Generalized System of Preferences (GSP) program, based on its level of economic development. The decision was effective May 17, it added.

The U.S. Trade Representative (USTR) in early March said Turkey was no longer eligible to participate because it "is sufficiently economically developed." It had begun reviewing the NATO ally's status in the program last August when the two countries were embroiled in a diplomatic row.

But Ankara had been hopeful that Washington would not go ahead with the decision, saying it would be against the $75 billion target for mutual trade laid out by President Donald Trump and Turkish President Tayyip Erdogan. (Reporting by Humeyra Pamuk and Eric Beech Editing by Sandra Maler and Lisa Shumaker)