The sheen of Qatar's $15 billion bailouts of Turkey lasted all of one day with the value of the Turkish lira again plunging, this time by as much as 8.5 percent to 6.3 per dollar on Aug. 17. The disheartening fall followed the lira's rapidly gaining ground in the previous days.
The lira plummeted to a record low of 7.24 to the dollar to start the week of Aug. 13 due to the adversarial relations between Turkey and the United States. Investors remain spooked by concerns over President Recep Tayyip Erdogan's domination of his country's monetary policy. The currency lost a third of its value this year.
The steep drop in the lira on Friday also pushed emerging market equities lower. It unleashed a wave of caution on other world markets, overshadowing hopes a U.S.-China meeting on Aug. 21 might do something to mitigate the trade war.
The United States told Turkey to brace for more economic sanctions unless it frees detained American pastor Andrew Brunson. The previous week is one Turkey will want to forget or failing that, replace with the much better news.
The good news came Aug. 16 when Qatar promised to invest $15 billion in Turkey. The lira improved six percent after Emir Sheikh Tamim Bin Hamad Bin Al Thani made the life-saving investment after a meeting with Erdogan on Aug. 15.
Erdogan has taken a number of steps to protect Turkey's economy from a trade war instigated by president Donald Trump and worsened by a volatile row over Brunson, who was illegally imprisoned by Turkey on trumped-up charges.
Turkey struck back at the United States on Aug. 15 and inflamed an already ruinous trade war by doubling or more than doubling tariffs on a range of U.S. imports, including cars, plastics, and alcohol.
Among the hardest hit by Turkey's new and punishing tariff duties announced Aug. 15 are American alcoholic drinks and spirits, which will pay 140 percent more and cars, whose taxes will rise by 120 percent. Turkey also imposed a 60 percent tariff on leaf tobacco and a 50 percent tariff on rice. There are also additional taxes on U.S. cosmetics and some food products.
The items hit by Turkey's new tariffs and listed in the country's Official Gazette and accounted for $1 billion of U.S. imports to Turkey in 2017. This amount is similar to the amount of Turkish steel and aluminum exports subjected to higher tariffs by Trump last week.
The decision shows Turkey initiating a proportional response to American tariffs hurting the Turkish economy, tweeted Vice President Fuat Oktay. In the same tweet, Oktay said tariffs on certain products were increased based on of the principle of reciprocity, and to counter deliberate economic attacks by Trump.
Turkey's escalation is the latest in an increasingly virulent spat that's mangled the once close ties between Ankara and Washington. It follows Erdogan's call on Aug. 14 for a boycott of U.S. electronics to retaliate for the Trump administration's punitive actions to pressure Turkey into releasing Brunson. The American is being tried in Turkey on espionage and terrorism-related charges.
As part of these actions, Washington last week imposed financial sanctions on two Turkish ministers. It also doubled aluminum and steel tariffs on Turkey.
