Erdogan warns Trump: Turkey does not respond to threats

President Donald Trump

Turkish President Recep Tayyip Erdogan warned the USA on Saturday that his country does not respond to threats, a day after President Donald Trump sent the lira into freefall by announcing he would double the rate of import tariffs on Turkish metals.

"Trump says via tweet that the tariff on aluminum imports will be increased to 20 percent and the tariff on steel imports will be raised to 50 percent as the Turkish Lira "slides rapidly downward against our very strong Dollar!

Mr Trump is also declaring that "Our relations with Turkey are not good at this time!".

While Turkey and the United States are at odds over a host of issues, the most pressing disagreement for Trump has been the fate of American Christian pastor Andrew Brunson, who is on trial on terrorism charges for allegedly supporting a group that Ankara blames for a failed coup in 2016.

Turkey, a North Atlantic Treaty Organisation ally, put him on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago.

The lira briefly fell as much as 14.6 per cent - its biggest one-day drop since early 2001 - before paring losses.

The tariff move effectively priced Turkish steel out of the USA market, which accounts for 13 percent of Turkey's steel exports.

In a Twitter post on Friday morning, Mr. Trump said the United States would bump Turkey's aluminum tariffs to 20 percent and steel tariffs to 50 percent and cited the country's deteriorating currency, the Turkish lira.

In a bid to ease investor concerns about Turkey's economic policy, the country's finance minister says the government will safeguard the independence of the central bank.

"Turkey expects other member countries to abide by worldwide rules", the ministry said in a statement, adding that it would support steel and aluminum exporters in all global platforms.

Erdoğan said the "waves of artificial financial instability" Turkey is being subjected to ignore its economic strength, as it faces "not a single problem" in macroeconomic data, producing power, or its banking system.

Meanwhile, investors are anxious about the economic policies of President Recep Tayyip Erdogan, who won a new term in office in June with sweeping new powers.

Erdogan appealed to a crowd in the city of Bayburt to exchange dollars and gold for Turkish lira to prop up the plunging currency. Turkey ranks seventh among all countries in steel exports to the U.S. market. "This is a domestic and national struggle".

"This will be my people's answer to those who declare economic war against us", he added.

Erdogan, a self-described "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. As the lira falls in value, the debt becomes harder to pay.

Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency.

Albayrak was speaking at a conference where he outlined his ministry's "new economic policy" as the currency plunged, raising questions about the country's financial stability.

The lira hit a record low of 6.24 per dollar on Friday, before recovering to 5.92 - still down a whopping 7 per cent on the day.

"The last time I can remember a currency exploding into a similar acceleration of weakness to what we have seen in the past 24 hours is the Russian ruble crisis that transpired late in 2014", Jameel Ahmad, the head of currency strategy at FXTM, said.

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