Trump takes aim at Turkey, announcing doubling of steel and aluminum tariffs in effort to punish country

Publish Date: 2018-08-13


 Turkish President Recep Tayyip Erdogan warned Friday against those who try to “bully” his country, as an announcement by President Trump imposing new tariffs on Turkey sent its currency into free fall.

“The language of threats and blackmail cannot be used against this nation,” Erdogan said in apparent response to Trump’s early-morning tweet saying he was doubling existing U.S. import levies on Turkish steel and aluminum. “Those who assume they can bring us to our knees through economic manipulations don’t know our nation at all,” he said, without directly mentioning Trump or the tariffs.

But the U.S. announcement quickly sent the value of the Turkish lira, already under severe strain, to a record low against the U.S. dollar. The currency crisis has fueled growing concerns in the international financial community and among investors about the health of the Turkish economy.

Relations between the two NATO allies were already in a downward spiral over a host of issues, including Syria policy, arms purchases and the fallout from a 2016 coup attempt against Erdogan. And there were immediate signs Friday that Russia could try to exploit the latest row between the United States and Turkey, a country where the U.S. military maintains a critical air base for operations in the Middle East.

Trump’s willingness to ratchet up the financial pain on Turkey followed an unsuccessful effort this week to resolve the ongoing dispute between the two countries over Andrew Brunson, an American pastor held on charges that include espionage and trying to overthrow the government.

In an op-ed published online by the New York Times late Friday, Erdogan recounted Turkey’s grievances with the United States, and called on it to “give up this misguided notion that our relationship can be asymmetrical.”

“Failure to reverse this trend of unilateralism and disrespect,” he wrote, “will require us to start looking for new friends and allies.”

The Brunson case is far from the only issue between Washington and Ankara. Turkey has demanded the extradition of a Turkish cleric living in Pennsylvania who it charges was the mastermind of the 2016 coup attempt against Erdogan. It also wants the release of a Turkish banker convicted here this year as part of an ongoing U.S. federal investigation of alleged violations of oil sanctions against Iran by a Turkish state bank.

high-level Turkish delegation that met in Washington this week with Deputy Secretary of State John Sullivan anticipated trading Brunson for Hakan Atilla, the convicted banker. But the meeting apparently was cut short when the U.S. side demanded the immediate and unilateral release of Brunson, whose case has become a cause celebre in Congress and among evangelical Christians, who are an important part of Trump’s political base.

At the same time, Congress has passed legislation preventing the export of 100 F-35 jets, bought
by Turkey in a co-production agreement, unless Ankara frees Brunson and drops a deal to buy a sophisticated Russian air defense system.

As Turkey becomes increasingly estranged from the United States, it has solidified relations with Russia, particularly between Erdogan and President Vladi­mir Putin. The two spoke on the telephone Friday morning soon after Trump’s tariff announcement. After the call, Erdogan hailed Turkey’s economic ties with Russia, saying that “these contacts make us stronger.”

Trump first threatened Turkey over the Brunson case in July, when he tweeted that “the United States will impose large sanctions on Turkey for their long time detainment of Pastor Andrew Brunson, a great Christian, family man and wonderful human being. He is suffering greatly. This innocent man of faith should be released immediately!”

On Aug. 1, the United States imposed sanctions on two Turkish cabinet ministers.

In announcing the new measures, in a Twitter post Friday morning, Trump noted the slide of the Turkish currency “against our very strong Dollar.” Relations with Turkey, he wrote “are not good at this time.”

The White House later said the tariff increases, to 20 percent for aluminum and 50 percent for steel, were unrelated to “negotiations on trade and any other matter” and were being effected under provisions for response to threats “to impair national security.”

Earlier this year, Trump imposed tariffs of 10 percent on aluminum imports and 25 percent on steel to combat the effects of subsidized Chinese steel production on global markets. To prevent Chinese companies from routing steel shipments through third countries, the administration also applied the import taxes to a number of U.S. allies, including Turkey, under the same provision of U.S. trade law, which declared that relying on foreign metals poses a risk to national security. The levies have been applied to a range of U.S. allies, including Japan, Canada and members of the European Union.

Experts on Turkish politics have long compared the styles of Trump and Erdogan as divisive leaders, and the two have previously declared their admiration for each other. But the same stubbornness that appears to drive Trump to take actions is likely to cause Erdogan to dig in his heels.

Soner Cagaptay, director of the Turkish research program at the Washington Institute for Near East Policy, predicted that Erdogan’s response to the new tariffs “will be perhaps completely opposite to what the United States wants to achieve.”

“Erdogan has built a conservative base that loves him but has also demonized and brutalized the demographic that is unlikely to vote for him,” Cagaptay said. “He is going to cast sanctions as an economic attack on Turkey . . . and on his mission to make Turkey great and make Muslims proud again.”

After stalling in the aftermath of the coup attempt, the Turkish economy rebounded last year and has been growing at an annual rate of more than 7 percent.

But the prognosis for long-term economic health is not optimistic, and aggressive state efforts to fuel growth under Erdogan’s strongman rule are on a collision course with economic imperatives.

After a ramping-up of spending, eased banking regulations and extended state guarantees for corporate borrowing, foreign investors poured money into the country, helping to drive the stock market nearly two-thirds higher.

Turkish banks, meanwhile, increasingly gambled by borrowing short-term funds overseas to fund their growing domestic lending, a profitable trade until investors soured on the country’s prospects and the lira began sinking in May.

The result has been a vicious cycle of collapsing confidence driving the currency down and pushing the government to change course or seek international help — something it so far has resisted.

Alarmed at the prospect of Turkey’s struggling to finance its trade and budget deficits — and with rising U.S. interest rates offering better returns elsewhere — investors are fleeing. The lira fell 14 percent Friday, worsening a decline that began earlier this year.

“Everybody runs for the doors at the same time,” said Andrew Kenningham, chief global economist for Capital Economics in London.

Turkey had already been hit hard by the global U.S. tariffs that Trump imposed in March. The United States is the Turkish steel industry’s top customer, with mills last year selling nearly 11 percent of their exports — particularly reinforcing bars used in construction — to American buyers. So far this year, the value of Turkey’s shipments to the United States are down 49 percent, according to the International Trade Administration.

In March, the International Monetary Fund warned that the Turkish economy was “showing clear signs of overheating” amid overly loose monetary policy.

Prices are rising at an annual rate of nearly 16 percent. But under a new constitution that gave him expanded power, Erdogan has sole authority over naming central bank officials, and he has insisted on keeping interest rates low. In July, Erdogan appointed his son-in-law, Berat Albayrak, minister of finance, replacing a former Merrill Lynch executive who had investors’ confidence.

“The people in charge in Ankara don’t know what they’re doing,” said economist Jacob Funk Kirkegaard of the Peterson Institute for International Economics.

Source:The Washington Post

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