Ankara (GPA) – The rapid decline in US-Turkish relations took reached several new levels in the past 24 hours with Turkey sanctioning US products, and the lira actually climbing as a result.
US-Turkish relations have been declining for some time now but lately, the usual diplomatic incidents have been occurring at breakneck speed. This last day and a half was a perfect demonstration of this with the day starting with new sanctions from Turkey on US products, a rejection of the appeal of Pastor Andrew Brunson, and agreeing to new direct investment by their allies in Qatar.
The first topic that made headlines on Wednesday was the announcement by Ankara that tariffs on certain US goods would be doubling in the near future. The products most affected would include liquor which will now be subject to a 140% tariff and American cars, which will have duties increased to 120%. American leaf tobacco will also be subjected to steep tariffs, also doubling to bring the amount up to about 60%.
There will also be doubled tariffs on imports such as coal, rice, and cosmetics as a part of what Turkish President Recep Erdogan has called an “economic war.” According to Erdogan, it was Washington that started this trade war with their tariffs on Turkish imports, most notably the new duties on steel and aluminum announced by Trump via Twitter.
According to Trump, all this entire standoff is the result of Turkey’s failure to release a jailed American pastor, Andrew Brunson, who has lived in Turkey for 23 years. Brunson was arrested shortly after the coup attempt on Erdogan on terror charges in 2016 and has been in jail or under house arrest ever since.
Brunson attended a hearing for an appeal in his case Wednesday in which his lawyers petitioned for the pastor to be released from house arrest and allowed to leave Turkey. The appeal was denied by a lower court in the coastal city of Izmir but Brunson still has a chance for another appeal with a higher court.
I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!
— Donald J. Trump (@realDonaldTrump) August 10, 2018
While countries like Iran and the DPRK would probably laugh at the level of sanctions on Turkey being called an “economic war” it is still unprecedented for this level of hostility between two members of NATO. In order to make up for this lack of trade with the US, Turkey is going to have to start seeking new economic partners.
This is where the new deals with Qatar come in. Following the split between Saudi Arabia and Qatar, Turkey immediately offered new trade deals with Qatar and to place Turkish troops in the small Gulf Kingdom to ward off an attack by Saudi Arabia. This assistance to – and investment with – Doha seems to have paid off now and it seems Qatar will be coming to the aid of Turkey.
Qatar’s Emir Tamim bin Hamad al-Thani called Erdogan on Monday after the weekend of hostilities with the US and made an emergency visit to Ankara on Wednesday. During this meeting, the Emir pledged to ink $15 billion in new direct investment deals with Turkey, much like Turkey did for Qatar during the economic blockade on Doha by the Gulf Cooperation Council (GCC).
A more unlikely ally also crawled out of the woodwork now that Erdogan is having his troubles with the US: Angela Merkel.
Despite years of hostility between Germany and Turkey (as evidenced by a recent poll showing most Germans don’t even support a state-visit Erdogan), Merkel is now apparently looking to revive the long-dying relations between the EU and Turkey. According to Merkel, “No one has an interest in an economic destabilization in Turkey…Germany would like to see an economically prosperous Turkey. This is in our interest.”
The reality behind this change of heart is that Merkel, and the leadership of the EU, who struck a major deal with Turkey to keep migrants from entering Europe, are now worried that if the economy in the border state deteriorates there could be an even bigger influx of migrants than in 2015-2016.
As a result of all of this, the Turkish lira actually saw a surprising uptick of around 7% which brings it up from its record low of about 14 cents on a dollar to 17 cents now. The lira rallied right after the new tariffs were announced by Ankara but this exchange rate is still down nearly 25% from where it was just a week ago. There is also likely higher consumer spending in Turkey right now as many average Turks realize the price of most American goods could now be in danger. Turkey may be buying more time right now, but this crisis has yet to be beaten back.