Wednesday, 17 October, 2018

Turkey will boycott United States electronic goods over sanctions, says Erdogan

Umit Bektas  Reuters Umit Bektas Reuters
Lindsey Cook | 15 August, 2018, 12:16

Erdogan has been repeatedly photographed with Apple products including the iPhone and iPad.

The Turkish lira has nosedived in value in the past week over concerns about Erdogan's economic policies and after the USA slapped sanctions on Turkey angered by the continued detention of an American pastor.

Apple, iPhone, and iPad are trademarks of Apple Inc., registered in the USA and other countries.

The past month has seen not only the sanctions that have sunk the Turkish lira, but the imposition of new sanctions against Iran, following the unilateral US abrogation of the 2015 Iranian nuclear deal with the P5+1-the US, UK, France, China, Russia and Germany-that have led to severe strains on the Iranian economy.

In response, U.S. President Donald Trump last week announced plans to double tariffs on imports of Turkish steel and aluminum.

"There is a price we're paying for the period we're in", he said in a combative speech in Ankara.

"I don't believe it's all over", said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.

Erdogan admitted the Turkish economy had problems - including a widening current account deficit and inflation of nearly 16 percent but added: 'Thanks to God, our economy is functioning like clockwork'. But "thanks to God, our economy is functioning like clockwork", he maintained.

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The row with Washington has helped to drive the lira TRYTOM=D3 to record lows, with the currency losing more than 40 percent of its value against the dollar this year, prompting central bank liquidity moves to support it. Not only is Turkey running a large current account deficit of around 5 percent of GDP. This difference between import and export of goods and services has been filled through external borrowing in foreign currency.

"The Turkish economy had been giving signs of structural chronic weaknesses and imbalances for quite some time", said Önder. U.S. banks were holding just $38 billion in Turkish debt at the end of this year's first quarter. It rebounded on Tuesday as Turks sold dollars.

Turkish Treasury and Finance Minister Berat Albayrak speaks during a presentation to announce his economic policy in Istanbul, Turkey on August 10, 2018.

In essence, investors have lost faith in the current economic policies of the Turkish government, anxious that a continued weakening of the economy will cause Turkish borrowers to struggle to repay their foreign debts.

The tariffs themselves are minor and impact around $1 billion (€875 million) in trade, but they weighed on market confidence in the vulnerable Turkish economy.

The punitive measures pushed Turkey's currency lira into freefall and rattled the country's financial markets.

While still nominally allies, the USA and Turkey's relationship is continuing to fall apart amid new economic penalties in the continued fight over an American pastor detained in Turkey.

Sanctions imposed by Washington on Ankara have stoked anxiety about Turkey's economy, already bogged down by double-digit inflation. More than 30 percent of the lira's loss has come since June, when Erdogan took over the office with new sweeping powers.

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