Donald Trump took a pot shot at Turkey’s floundering economy as he announced further trade tariffs amid a diplomatic spat.
The announcement exacerbated the Turkish lira’s nosedive against the dollar and appeared to push the Nato ally closer to Russia.
The Turkish lira’s decline is largely the result of concerns about Ankara’s economic policies and President Recep Tayyip Erdogan’s push to amass power.
But the situation was compounded on Friday when the US president tweeted he had authorised a doubling of tariffs on steel and aluminium.
Mr Trump announced the move on Twitter, adding in typically bombastic style that the value of the Turkish lira was sliding “rapidly downward against our very strong Dollar”.
“Our relations with Turkey are not good at this time,” he declared.
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The lira tumbled 13% to 6.51 per US dollar in one day, a huge move for a currency and one that will make the Turkish poorer and further shake international investors’ confidence in the country.
Turkey and the US are Nato allies, but a diplomatic spat with Washington has added to economic turmoil that has seen Turkey’s currency drop 40% so far this year.
The row involves Turkey arrest of an American pastor, who has been put on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago.
The US responded by imposing sanctions on Turkey and after inconclusive talks this week aimed at solving the spat, Mr Trump turned the screws on the country, saying tariffs on aluminium imports would be increased to 20% and the tariff on steel imports will be raised to 50%.
The tariffs hurt Turkey as the US is the biggest destination for Turkish steel exports, making up 11% of the Turkish export volume.
But in what appears to be a diplomatic riposte to the US move, Turkey said Mr Erdogan had held a phone call with Russian President Vladimir Putin to discuss economic ties.
It did not disclose details, but the announcement suggests Turkey might gravitate further towards co-operation with Russia, whose relations with the West are at their lowest since the Cold War.
Turkey’s woes have been aggravated by investor worries about the economic policies of Mr Erdogan, who won a new term in office in June with sweeping new powers.
Mr Erdogan has been putting pressure on the central bank to not raise interest rates in order to keep fuelling economic growth.
He claims higher rates lead to higher inflation – the opposite of what is taught as standard economic theory.
Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency.
In modern economies, central banks are meant to be independent of governments to make sure they set policies that are best for the economy, not politicians.
But since adopting increased powers, Mr Erdogan appears to have greater control over the bank as well.
Mr Erdogan appealed for calm and renewed a call on people to change foreign money into local lira.
“Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks. This is a domestic and national struggle.”
He appeared to blame foreigners for trying to hurt Turkey, saying: “This will be my people’s response against those waging an economic war against us.”
On Thursday, Mr Erdogan said: “If they have their dollar, we have the people, we have Allah.”
Turkey’s treasury and finance minister Berat Albayrak — who is Mr Erdogan’s son-in-law — tried to ease investor concerns during a conference, saying the government would safeguard the independence of the central bank.
“One of our principles will be ensuring the full independence of monetary policy,” Mr Abayrak said as he outlined his ministry’s “new economic model”.