Trump OKs stiffer tariffs on Turkish metals as lira plummets

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Compounding the lira's agony, President Donald Trump said he had doubled steel and aluminium tariffs on Turkey, noting that relations between the North Atlantic Treaty Organisation allies were "not very good".

The US president revealed the action on Friday as he noted how the Turkish lira "slides rapidly downward" against the "very strong" US dollar.

"Aluminum will now be 20 percent and Steel 50 percent".

Banks were among the biggest fallers after the Financial Times reported that the European Central Bank is concerned about the exposure of some of the euro area's biggest lenders to Turkey in light of the currency fall.

The lira has been falling on worries about Erdogan's influence over monetary policy and worsening relations with the United States.

President Tayyip Erdogan told Turks on Friday to exchange their gold and dollars into lira, with the currency in free fall as President Donald Trump escalated a feud with Ankara by doubling tariffs on metals imports.

For a start, investors are anxious that Turkish companies that borrowed heavily to profit from a construction boom may struggle to repay loans in dollars and euros, as the weakened lira means there is now more to pay back. Investors in Turkey are also anxious about President Erdogan's interference in the country's central bank.

"If there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks".

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Last week, the United States imposed sanctions on Turkey's justice minister and interior minister for not releasing USA pastor Andrew Brunson.

On July 26, Trump announced that he would hit Turkey with "large sanctions" if it continued to hold Brunson, adding "This innocent man of faith should be released immediately!"

The stock market has also fallen 17%, while government borrowing costs have risen to 18% a year, according to Andrew Walker, the BBC World Service economics correspondent.

Cornell University economist Eswar Prasad told the New York Times Friday that Trump's announcement sets "a worrying precedent for future trade sanctions that could be triggered by purely market-driven changes in exchange rates ..." The plunge in the value of the currency coupled with an inflation rate of almost 16% could cause a lot of damage to Turkey's economy.

The currency had spent much of 2014 hovering at just over two to the USA dollar but broke through the three mark for the first time after the 2016 failed coup bid and then slid to four earlier this year. The ruble fell the most since the 2015 oil shock after the US announced new sanctions on Russian Federation over a nerve-agent attack in the U.K. Amid it all, Elon Musk roiled Tesla Inc.'s shares with a tweet signaled he'd take the firm private. Turkish President Recep Tayyip Erdogan addressed supporters Friday in the provincial city of Bayburt.

The lira hit a record low of 6.24 per dollar on Friday, before recovering to 5.92 - still down a whopping 7 per cent on the day.

And of course, Brunson and the other detainees, including local staff of the USA diplomatic mission and various persons thought in some cases to be Gulenist Turkish-Americans, would have to be released.

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. Spanish banks, in particular, are the most exposed, with over $80 billion in Turkish loans. Overnight it had retreated to its lowest since November 2016 on threats of new USA sanctions, weakening beyond the psychologically important 65-per-dollar threshold.

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