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You can find the current article at its original source at https://www.theguardian.com/business/live/2018/aug/15/turkish-lira-crisis-turkey-raises-tariffs-on-us-goods-business-erdogan-markets-live
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| Version 1 | Version 2 |
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| Turkish lira crisis: Turkey raises tariffs on US goods – business live | Turkish lira crisis: Turkey raises tariffs on US goods – business live |
| (about 1 hour later) | |
| Turkish trade minister Ruhsar Pekcan says the new tariffs will “protect the rights of Turkish companies”, as well as retaliating against America’s tariffs on steel and aluminium | |
| Pekcan also insisted Turkey isn’t dependent on the US, saying: | |
| The United States is an important trading partner, but it is not our only partner. We have other partners and alternative markets.” | |
| (via Turkey’s Anadolu news agency) | |
| Hiking tariffs won’t help Turkey tackle its key financial challenge -- to keep servicing its foreign loans. | |
| Turkish companies owe almost $300bn in foreign denominated debt. That includes a surge in borrowing by Turkish banks, who have tapped foreign wholesale markets to help fund its credit boom. | |
| The slide in the lira in recent weeks has pushed up the cost of refinancing those loans (finding a new lender when an existing debt matures). | |
| Jurgen Odenius, Economic Counsellor at PGIM Fixed Income, explains: | |
| The root cause of the crisis lies in a leverage-financed domestic demand boom that increased the external financing requirement of Turkey’s corporations, banks, and government to an estimated $229 billion this year. Most of these liabilities fall on the private sector, mainly banks and corporations; the sovereign owes only $11 billion. What makes the problem worse is that the external financing requirement is trending up over the medium term, indicative of a long-standing over-reliance on foreign-funded leverage. | |
| As the lira collapses, this lending boom now is undoubtedly grinding to a sudden halt. Foreign financiers, whether they exist as banks or bond investors, are re-assessing the outlook and related repayment prospects. Western European banks from Spain and France are particularly exposed, with over half of the debt owed to them. The trouble is that the Turkish financial system and the corporate sector are short dollars. | |
| GAM’s Paul McNamara says the issue is crucial: | |
| Top 3 finance issues facing Turkey:* roll over foreign loans to banks* roll over foreign loans to banks* roll over foreign loans to banksThe rest is noise. | |
| Turkey’s new swathe of tariffs are going to have a major impact on the cost of US goods. | Turkey’s new swathe of tariffs are going to have a major impact on the cost of US goods. |
| The list, published on the country’s Official Gazette, shows that the levies on some products will more than double. | The list, published on the country’s Official Gazette, shows that the levies on some products will more than double. |
| For example: | For example: |
| Rice: Tariff more than doubled to 50%, up from 20% | Rice: Tariff more than doubled to 50%, up from 20% |
| Spirits: Tariff more than tripled to 140%, up from 40% | Spirits: Tariff more than tripled to 140%, up from 40% |
| Coal: Tariff raised to 14%,from 10% | Coal: Tariff raised to 14%,from 10% |
| Beauty and make-up products: Tariff doubled to 60%, from 30% | Beauty and make-up products: Tariff doubled to 60%, from 30% |
| Certain types of paper: Tariff doubled to 50%, from 25% | Certain types of paper: Tariff doubled to 50%, from 25% |
| Motor cars: Tariff more than tripled to 120%, from 35% | Motor cars: Tariff more than tripled to 120%, from 35% |
| TABLE: Turkey is targeting same U.S. products as in the initial retaliation (effective June 21), but significantly raising the tariffs ⬇️Initial: https://t.co/oDr3qOMRCPNow: https://t.co/ajmGyrhUZe pic.twitter.com/C3zffLaOHh | TABLE: Turkey is targeting same U.S. products as in the initial retaliation (effective June 21), but significantly raising the tariffs ⬇️Initial: https://t.co/oDr3qOMRCPNow: https://t.co/ajmGyrhUZe pic.twitter.com/C3zffLaOHh |
| Back in Turkey, the government is preparing for show of support from Qatar. | Back in Turkey, the government is preparing for show of support from Qatar. |
| The emir of Qatar, Sheikh Tamim bin Hamad al-Thani, left Doha to travel to Ankara for a “working visit” with president Erdoğan. | The emir of Qatar, Sheikh Tamim bin Hamad al-Thani, left Doha to travel to Ankara for a “working visit” with president Erdoğan. |
| The Gulf Times says they will discuss bilateral relations between Qatar and Turkey. | The Gulf Times says they will discuss bilateral relations between Qatar and Turkey. |
| They will also examine: | They will also examine: |
| “means of strengthening the existing strategic cooperation between the two countries in various fields, in addition to a number of issues of mutual interest. | “means of strengthening the existing strategic cooperation between the two countries in various fields, in addition to a number of issues of mutual interest. |
| Turkey and Qatar are close allies. There is a Turkish military base in the Gulf state, and Turkey was quick to send food aid to Qatar when Saudi Arabia imposed a blockade last year. | Turkey and Qatar are close allies. There is a Turkish military base in the Gulf state, and Turkey was quick to send food aid to Qatar when Saudi Arabia imposed a blockade last year. |
| However, the wealthy Gulf state might be reluctant to anger America by providing Ankara with financial aid at this time. | However, the wealthy Gulf state might be reluctant to anger America by providing Ankara with financial aid at this time. |
| Just in: New inflation figures show that Britain’s cost of living squeeze continues. | Just in: New inflation figures show that Britain’s cost of living squeeze continues. |
| The consumer prices index rose by 2.5% in July, up from 2.4% in June - the first year-on-year increase in 2018. | The consumer prices index rose by 2.5% in July, up from 2.4% in June - the first year-on-year increase in 2018. |
| The wider retail prices index rose by 3.2%, down from 3.4%, and faster than basic pay (which increased by 2.7% in the last year). | The wider retail prices index rose by 3.2%, down from 3.4%, and faster than basic pay (which increased by 2.7% in the last year). |
| Total pay, including bonuses, only rose by 2.4% in the last year. | Total pay, including bonuses, only rose by 2.4% in the last year. |
| This RPI figure is used to set UK rail fares, so commuters should brace for prices to increase in 2019. | This RPI figure is used to set UK rail fares, so commuters should brace for prices to increase in 2019. |
| Rail fares to rise 3.2% in January, inflation figure confirms | Rail fares to rise 3.2% in January, inflation figure confirms |
| Turkish media are reporting that a court has rejected an appeal for the release of American pastor Andrew Brunson. | Turkish media are reporting that a court has rejected an appeal for the release of American pastor Andrew Brunson. |
| Hurriyet newspaper said the court in Izmir rejected the appeal from Brunson’s lawyer, but that a higher court would review the appeal. | Hurriyet newspaper said the court in Izmir rejected the appeal from Brunson’s lawyer, but that a higher court would review the appeal. |
| If Brunson remains under house arrest, it’s hard to see US-Turkey relations improving.... | If Brunson remains under house arrest, it’s hard to see US-Turkey relations improving.... |
| The White House refuses to make any further concessions or negotiatiate to get Brunson out and the Turkish court now refuses to release him. No obvious end in sight for the diplomatic spat that has cost Turkey so dearly. https://t.co/PXhrzaH9cI | The White House refuses to make any further concessions or negotiatiate to get Brunson out and the Turkish court now refuses to release him. No obvious end in sight for the diplomatic spat that has cost Turkey so dearly. https://t.co/PXhrzaH9cI |
| Economist Jens Bastian fears for Turkey’s financial prospects: | Economist Jens Bastian fears for Turkey’s financial prospects: |
| Don‘t be fooled by short-term stabilisation of #Turkish lira. What is happening is a classic currency-and-debt crisis. Despite measures by the government, the crisis is now self-reinforcing, the loss of external confidence linking with domestic currency fluctuations + higher debt | Don‘t be fooled by short-term stabilisation of #Turkish lira. What is happening is a classic currency-and-debt crisis. Despite measures by the government, the crisis is now self-reinforcing, the loss of external confidence linking with domestic currency fluctuations + higher debt |
| Robert Ward of the Economist Intelligence Unit says Turkey needs a ‘decisive orthodox’ response to the currency crisis (ie, a chunky interest rate hike), rather than tariffs on US goods. | Robert Ward of the Economist Intelligence Unit says Turkey needs a ‘decisive orthodox’ response to the currency crisis (ie, a chunky interest rate hike), rather than tariffs on US goods. |
| Erdogan tariff increase on US cars, alcohol etc point to doubling down on “economic war” line. Suggests decisive orthodox policy move from #Turkey’s govt to draw line under crisis still unlikely. Normalisation of TR relations w US now also critical to lira crisis resolution. | Erdogan tariff increase on US cars, alcohol etc point to doubling down on “economic war” line. Suggests decisive orthodox policy move from #Turkey’s govt to draw line under crisis still unlikely. Normalisation of TR relations w US now also critical to lira crisis resolution. |
| Bloomberg has calculated that Turkey’s new tariffs cover around $1bn of US imports. | Bloomberg has calculated that Turkey’s new tariffs cover around $1bn of US imports. |
| That’s similar to the amount of Turkish steel and aluminium exports that were subjected to higher tariffs by President Donald Trump last week, suggesting this genuinely is a tit-for-tat response. | That’s similar to the amount of Turkish steel and aluminium exports that were subjected to higher tariffs by President Donald Trump last week, suggesting this genuinely is a tit-for-tat response. |
| Lira having another good day, strengthening to 5.9652 to the dollar, as Turkey's banking watchdog increases limits on FX swap transactions. | Lira having another good day, strengthening to 5.9652 to the dollar, as Turkey's banking watchdog increases limits on FX swap transactions. |
| The lira’s recovery comes as Turkey’s financial regulators impose new restrictions on the country’s banks. | The lira’s recovery comes as Turkey’s financial regulators impose new restrictions on the country’s banks. |
| These rules make it harder for banks to buy and sell foreign exchange derivatives with overseas banks. | These rules make it harder for banks to buy and sell foreign exchange derivatives with overseas banks. |
| That will prevent some investors from betting against the lira. | That will prevent some investors from betting against the lira. |
| Reuters has the details: | Reuters has the details: |
| Turkish banking watchdog BDDK on Wednesday said it is cutting the limit for Turkish banks’ forex swap, spot and forward transactions with foreign banks to 25 percent of a bank’s equity. | Turkish banking watchdog BDDK on Wednesday said it is cutting the limit for Turkish banks’ forex swap, spot and forward transactions with foreign banks to 25 percent of a bank’s equity. |
| The BDDK had said on Sunday that the limit would be 50 percent of the bank’s equity. | The BDDK had said on Sunday that the limit would be 50 percent of the bank’s equity. |
| n a statement, the BDDK said the rate will be calculated daily and new transactions will not be performed or renewed until the current excess of the amount is realised at a quarter of a bank’s capital. | n a statement, the BDDK said the rate will be calculated daily and new transactions will not be performed or renewed until the current excess of the amount is realised at a quarter of a bank’s capital. |
| Paul McNamara, investment director at asset manager GAM, says this squeeze will have helped the lira recover: | Paul McNamara, investment director at asset manager GAM, says this squeeze will have helped the lira recover: |
| Central Bank has squeezed local funding by limiting banks use of swap lines. https://t.co/tU7N4prdbR | Central Bank has squeezed local funding by limiting banks use of swap lines. https://t.co/tU7N4prdbR |
| Investor Martin Enlund points out that it will also make it harder for Turkish investors to protect themselves from the crisis: | Investor Martin Enlund points out that it will also make it harder for Turkish investors to protect themselves from the crisis: |
| #EURTRY: Turkish Regulator Halves Limit for Banks' Swap Transactions. Good for $TRY as it limits the room for investors to short TRY, but bad for Turkey asset prices (more costly to hedge TRY risk) pic.twitter.com/HbQdw2kr6v | #EURTRY: Turkish Regulator Halves Limit for Banks' Swap Transactions. Good for $TRY as it limits the room for investors to short TRY, but bad for Turkey asset prices (more costly to hedge TRY risk) pic.twitter.com/HbQdw2kr6v |
| Boom! Turkey’s currency just dipped back below the psychologically important 6-lira-to-the-dollar mark, as this morning’s rally continues. | Boom! Turkey’s currency just dipped back below the psychologically important 6-lira-to-the-dollar mark, as this morning’s rally continues. |
| The Turkish lira has risen by 2.5% in early trading, after Ankara hit the US with fresh tariffs. | The Turkish lira has risen by 2.5% in early trading, after Ankara hit the US with fresh tariffs. |
| It’s currently changing hands at below 6.2 lira to the dollar, up from around 6.35 lira last night, extending Tuesday’s recovery. | It’s currently changing hands at below 6.2 lira to the dollar, up from around 6.35 lira last night, extending Tuesday’s recovery. |
| That’s still an extremely weak position compared to four months ago, though, when one dollar was only worth 4 lira. | That’s still an extremely weak position compared to four months ago, though, when one dollar was only worth 4 lira. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Turkey has raised the stakes in its diplomatic battle with America by hiking the tariffs on some US goods. | Turkey has raised the stakes in its diplomatic battle with America by hiking the tariffs on some US goods. |
| Fuat Oktay, the country’s vice-president, says the measures are a retaliation for the US government’s “deliberate attacks” on the Turkish economy in recent weeks. | Fuat Oktay, the country’s vice-president, says the measures are a retaliation for the US government’s “deliberate attacks” on the Turkish economy in recent weeks. |
| Under the plan, the tax on US alcohol will be hiked to 140%, the car tariff is going up to 120%, while tariffs on coal, cosmetics and rice are also being raised. | Under the plan, the tax on US alcohol will be hiked to 140%, the car tariff is going up to 120%, while tariffs on coal, cosmetics and rice are also being raised. |
| #Turkey imposes additional tariffs on US imports ranging from 10 to 120 % in retaliation to US sanctions. The measure covers vehicles, tobacco products, rice, alcoholic beverages, coal, beauty products, paper etc. pic.twitter.com/G5dT4DNckN | #Turkey imposes additional tariffs on US imports ranging from 10 to 120 % in retaliation to US sanctions. The measure covers vehicles, tobacco products, rice, alcoholic beverages, coal, beauty products, paper etc. pic.twitter.com/G5dT4DNckN |
| Oktay declared on Twitter that Turkey was responding to America’s decision to double the tariffs on Turkish steel and aluminium. | Oktay declared on Twitter that Turkey was responding to America’s decision to double the tariffs on Turkish steel and aluminium. |
| He tweeted: | He tweeted: |
| “The import duties were increased on some products, under the principle of reciprocity, in response to the U.S.administration’s deliberate attacks on our economy,” | “The import duties were increased on some products, under the principle of reciprocity, in response to the U.S.administration’s deliberate attacks on our economy,” |
| ABD yönetiminin ekonomimize bilinçli saldırılarına karşı, mütekabiliyet ilkesi çerçevesinde, bazı ürünlerin ithalatında vergi oranları artırılmıştır. | ABD yönetiminin ekonomimize bilinçli saldırılarına karşı, mütekabiliyet ilkesi çerçevesinde, bazı ürünlerin ithalatında vergi oranları artırılmıştır. |
| Zor günlerde liderinin etrafında kenetlenen Milletimiz, kural tanımaz tavırlara karşı uluslararası kamuoyu ile de kenetlenmiş, haksızlıklara karşı Dünya’yı cesaretlendirmiştir. Durmak yok, yola devam. | Zor günlerde liderinin etrafında kenetlenen Milletimiz, kural tanımaz tavırlara karşı uluslararası kamuoyu ile de kenetlenmiş, haksızlıklara karşı Dünya’yı cesaretlendirmiştir. Durmak yok, yola devam. |
| The move comes a day after president Recep Tayyip Erdoğan announced a boycott on US electrical goods, encouraging Turks to shun iPhones and support local manufacturer Vestel instead. | The move comes a day after president Recep Tayyip Erdoğan announced a boycott on US electrical goods, encouraging Turks to shun iPhones and support local manufacturer Vestel instead. |
| Last night, the White House renewed its calls for Turkey to release the evangelical pastor who has been detained by Turkish authorities on espionage charges since 2016. | Last night, the White House renewed its calls for Turkey to release the evangelical pastor who has been detained by Turkish authorities on espionage charges since 2016. |
| White House Press Secretary Sarah Sanders told reporters: | White House Press Secretary Sarah Sanders told reporters: |
| “The president has a great deal of frustration on the fact that Pastor Brunson has not been released as well as the fact that other U.S. citizens and employees of diplomatic facilities have not been released.” | “The president has a great deal of frustration on the fact that Pastor Brunson has not been released as well as the fact that other U.S. citizens and employees of diplomatic facilities have not been released.” |
| So with the crisis still swirling, investors around the globe will remain nervous. We’ll be tracking all the main events through the day.... | So with the crisis still swirling, investors around the globe will remain nervous. We’ll be tracking all the main events through the day.... |
| The agenda | The agenda |
| 9.30am BST: UK inflation for July | 9.30am BST: UK inflation for July |
| 9.30am BST: UK house price data for June | 9.30am BST: UK house price data for June |
| 1.30pm BST: US retail sales | 1.30pm BST: US retail sales |