With US sanctions and tariffs hitting Turkey this month for its refusal to release an American pastor, the relationship between the two North Atlantic Treaty Organisation allies is crumbling amid fears on the regional impact.
Trump said he had authorized higher tariffs on imports from Turkey, imposing a 20 percent duty on aluminum and 50 percent one on steel.
"As he stated, the president has authorized the preparation of documents to raise tariffs on imports of steel and aluminum from Turkey", White House Deputy Press Secretary Lindsay Walters said.
Bank shares across Europe fell and the euro slipped to its lowest since July 2017 as the Financial Times quoted sources as saying the European Central Bank was concerned about European lenders' exposure to Turkey. The U.S. was Turkey's biggest export market for steel previous year, though exports have fallen since.
A financial shockwave ripped through Turkey on Friday as its currency nosedived on concerns about its economic policies and a dispute with the USA, which President Donald Trump stoked further with a promise to double tariffs on the North Atlantic Treaty Organisation ally.
President Trump seems to think that Turkey has been trying to take advantage of us by having an economic crisis that's sent their currency tumbling.so he's taken steps to make it tumble even more? Turkey fears the fine on Halkbank - a small player by global standards - could follow the precedent of the hefty U.S. treasury fines levied on German and Swiss banks for sanctions-busting. Rate increases are the central bank's main tool to support the currency and fight inflation.
Turkey said on Friday it would retaliate to the raising of steel and aluminium tariffs by the USA administration.
Trump's tweet caused a further drop in the Turkish currency, which is now down 13 percent on the day. Indeed, through Thursday, the Turkish lira had lost 32 percent of its value against the dollar just since the beginning of the year.
"Don't forget", he said, "if they have their dollars, we have our people, our God". But Turkey would undoubtedly sustain much more damage, with its large companies and banks struggling to pay for borrowing in foreign currency and short-term money - vital to its economy - being scared away.
Mr Erdogan has been putting pressure on the central bank to not raise interest rates in order to keep fuelling economic growth. He said this would be Turkey's response "to those who wage economic war against us".
Alan Madison, a spokesman for Borusan Mannesmann's United States subsidiary, said the company and its Turkish parent were still studying Trump's new proposal and declined to comment further.
Coupled with an inflation rate of almost 16 per cent, that could cause severe damage to the local economy. The tech-heavy Nasdaq composite was down 83 points, or 1.1%, poised to end an eight-day winning streak.
"President Erdogan's strengthened powers under the new presidential system have made it increasingly uncertain whether policymakers will be able to act to stabilise the economy", said William Jackson, chief emerging markets economist at Capital Economics in London.
Yesh Atid party leader Yair Lapid applauded US President Donald Trump's decision Friday to impose tariffs on Turkey, further pressuring that country's troubled economy amid a diplomatic row with Washington.