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USA tariffs hike adds to Turkey's economic problems

13 August 2018

At the same time, it has continued the deterioration of Turkey's relations with its partners and allies, foremost the United States.

Speaking to supporters in the Black Sea coastal city of Trabzon, Erdogan revealed details of negotiations held last week between the two countries, saying Washington had threatened sanctions if Turkey refused to release the pastor.

Prior to Trump's announcement, the Turkish lira fell to its lowest point ever against the USA dollar on Friday.

He has dismissed any suggestions that Turkey might intervene in dollar-denominated bank accounts, saying any seizure or conversion of those deposits into lira was out of the question.

During the speech, Erdogan reiterated his earlier claim that the crisis has resulted from "an operation against our economy conducted through exchange rates" and said Turkey would prevail.

"Interest rates are an exploitation tool that makes the rich richer and the poor poorer", Mr. Erdogan said.

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"We are once again facing a political, underhand plot".

Erdogan, who has called himself the "enemy of interest rates", wants cheap credit from banks to fuel growth, but investors fear the economy is overheating and could be set for a hard landing.

Turkey's central bank - which has raised its main policy rate to 17.75 per cent - unexpectedly refrained from a further hike at its last meeting. "What is the reason for all this storm in a tea cup?"

In the event of contagion, Turkey's economic misfortune would likely hit its closest neighbors who are most fragile first, some market analysts said.

Turkish market shares of the total Egyptian exports is about 5%, which is a very modest share, said Mohamed Abu Basha, head of macroeconomic analysis at the Cairo-based investment bank EFG-Hermes, noting that the Turkish Lira slump is a big issue, which Turkish authorities will find huge difficulties to deal with.

"I am specifically addressing our manufacturers: Do not rush to the banks to buy dollars". "We have seen your play and we challenge you".

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"Repeated efforts to communicate to the USA administration that none of the stated criteria driving America's tariffs are applicable to Turkey have thus far proven fruitless", Trade Minister Ruhsar Pekcan said in a statement.

He added that businesses should "know that keeping this nation alive and standing isn't just our job, but also the job of industrialists, of merchants".

The case of Andrew Brunson, an evangelical Christian, is one of a series of disputes that lies at the heart of deteriorating ties between the two North Atlantic Treaty Organisation allies.

Erdogan's remarks came a day after US President Donald Trump ramped up his attack on Turkey by doubling US tariffs on Turkish aluminum and steel imports to 20 percent and 50 percent, respectively. Erdogan asked Washington. "What happened to you now?"

"We will give our answer, by shifting to new markets, new partnerships and new alliances, to the one who waged an economic war against the entire world and also included our country", he said.

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