Turkey braces for hard times amid currency crisis, USA spat

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The Trump administration said Wednesday that Erdogan's imposition of retaliatory tariffs against the USA were "a step in the wrong direction".

As NPR explained in a primer on the dispute, much of the ill will shared by Turkey and the US stems not only from the back-and-forth on tariffs, but also from a diplomatic dust-up centered on two men of faith. It follows a string of urgent steps Erdogan has taken to protect its economy from an escalating feud with USA counterpart Donald Trump over an American pastor held in Turkey.

"The tariffs that are in place on steel will not be removed with the release of pastor Brunson".

Brunson was arrested in October 2016 during a nation-wide purge of suspected dissidents following the aftermath of a failed coup in July 2016.

Earlier in the day, the currency had shrugged off USA comments ruling out the removal of steel tariffs on Turkey even if it frees an American pastor who lies at the center of the complex feud between Washington and Ankara.

The dispute is one of several between the North Atlantic Treaty Organisation allies, including diverging interests in Syria and US objections to Ankara's ambition to buy Russian defence systems, that have contributed to instability in Turkish financial markets.

Turkish Airlines and Turk Telekom have said they will halt advertising in USA media.

Trump's doubling of tariffs on Turkish metals last week prompted Ankara, which says it will not bow to threats, to raise tariffs on US cars, alcohol and tobacco by the same amount on Wednesday.

The currency has lost almost 40 percent against the dollar this year, driven by worries over Erdogan's growing influence on the economy and his repeated calls for lower interest rates despite high inflation.

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It was unclear whether Erdogan's call for Turks to sell dollars would be widely heeded, but a Turkish news agency said traders in Istanbul's historic Eminonu district converted $100,000 into lira on Tuesday. The currency meltdown this month has already made it much more costly for businesses to refinance at least $16 billion in bonds denominated in foreign currencies that are due by year-end, according to calculations by Bloomberg.

Albayrak, a 40-year-old former company executive with a doctorate in finance, said Turkey would not hesitate to provide support to the banking sector. While officially the bad debt ratio at Turkey's banks is just 3 percent, lenders are in the process of renegotiating upwards of $20 billion of loans to try to prevent them from going into default.

Turkey should commit to sound economic policies to promote stability and reduce imbalances at a time of market volatility, an International Monetary Fund spokesperson said on Wednesday as a row between Washington and Ankara over the jailing of an American pastor dragged on.

This is where Turkish steel exports could come into play, analysts say as steel is a highly liquid market with growing demand.

Some Turks are reacting with defiance to their plunging currency and an escalating trade and political dispute with the United States - an indication that they are ready to endure economic pain and risk further deterioration in a key, yet troubled alliance dating from the Cold War.

Yakis agreed that Turkey, with its critically important geo-strategical position and a powerful army, could "easily find allies elsewhere if it is alienated by its North Atlantic Treaty Organisation allies". In an overture that signals normalizing relations after a series of diplomatic clashes, Germany plans to host Erdogan for a state visit on September 28.

One Ankara resident, Aydin Cavus, said consumer prices are "normal right now" while another shopper said inflation was hitting hard, reflecting mixed impressions about the looming impact of Turkey's financial challenges.

Erdogan refused to relent, leveling the retaliatory measures on US products and urging his citizens to reject American products.

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