Trump doubles steel and aluminum tariffs on Turkey

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"They keep lagging behind the curve and the pace of the depreciation and the penalty that the market inflicts on Turkey when it sells off is increasing at a more than linear pace, nearly exponentially".

In addition to the steep drop in the Turkish Lira, which effectively reduces the impact of the tariffs, the USA has so far been unsuccessful in persuading Turkish President Recep Tayyip Erdoğan to release US pastor Andrew Brunson. Together, that can weigh on the currency. To do that, they have to sell lira - worsening the rout.

Trump's announcement came less than an hour after Turkish President Tayyip Erdogan urged Turks to help defend the country against what he called economic war against the country. His comments on interest rates - and his choice of a family member as finance minister - have heightened perceptions that the central bank is not independent.

Adding to investors' concerns, Erdogan pledged a continuation of his debt-fueled construction policy to boost the economy, which is blamed for Turkey's rampant inflation and has added to currency weakness. "It is a national fight", he said.

Erdogan's claim of a Western political plot against him sparked alarm in investors and prompted an acceleration in the currency sell-off. The first one was Erdogan gave a speech doubling down on his failed policies, saying once again all their problems were the result of an "economic war" being waged against Turkey. The U.S. has made a decision to sanction a North Atlantic Treaty Organisation ally - absolutely remarkable. But invoking national security is the only way to square Trump's policy with US law and WTO rules.

The White House said he had authorized them under asection of US trade law that allows for tariffs on nationalsecurity grounds.

Trump tweeted that he had authorized the doubling of steel and aluminum tariffs "with respect to Turkey".

In a tweet, he said he was imposing duties of 20 per cent on Turkish aluminium and 50 per cent on steel.

Turkey's steel exports were valued at $11.5 billion previous year, accounting for 7.3 percent of its total exports worth $157 billion, according to the Turkish Steel Exporters' Association. These looming payments are one of the main reasons for the government's fragility, because a weaker lira makes that debt more expensive to pay off. So the sudden fall raises the possibility of corporate bankruptcies or bank failures that could hurt the economy.

He also said increasing production, exports and employment was the best response to the country's challenges.

Steel futures on Friday were up 1 percent at $907 per ton on the New York Mercantile Exchange, but are up 46 percent from $621 per ton a year ago.

Q: What impact could the turmoil have outside Turkey? The euro currency dropped to a 13-month low on Friday, and bank shares fell.

Europe is also dependent on Turkey to restrain the flow of migrants from conflict in the Middle East in return for aid.

"The situation of Turkey can not go on for much longer - I think they will have to intervene", Cristian Maggio, head of emerging markets strategy at TD Securities, adding that the intervention needed to be "drastic".

"While Turkey's fundamental challenges are numerous, there are plenty of straightforward textbook aggressive interest rate hike from the Central Bank would be a good start, something of the order of +1,000bp that Argentina delivered back in May would be appropriate at this juncture".

It said it would support steel and aluminium exporters on all global platforms, and the U.S. remained an important trade partner. The Eurozone is particularly exposed - the European Central Bank is anxious about non-hedged exposure of European banks to Turkish companies and if Turkish banks fail, there's no question that it will affect markets around the world.

Q: What is Erdogan proposing to do?