Erdogan Says Turkey Will Boycott US Electronics, Lira Steadies
President Recep Tayyip Erdogan said on Tuesday that Turkey will boycott electronic products from the United States, retaliating in a dispute with Washington that has helped drive the lira to record lows.
The lira has lost more than 40 percent this year and crashed to an all-time low of 7.24 to the dollar early on Monday, hit by worries over Erdogan’s calls for lower interest rates and worsening ties with the United States.
The weakness of the Turkish currency has rippled through global markets. Its drop of as much as 18 percent on Friday hit US and European stocks as investors fretted about banks’ exposure to Turkey.
On Tuesday the lira recovered some ground, trading at 6.53 to the dollar at 0918 GMT, up around five percent on the day.
It was supported by news of a planned conference call in which the finance minister will seek to reassure investors concerned by Erdogan’s control of the economy and his resistance to interest rate hikes to tackle double-digit inflation.
Erdogan says Turkey is the target of an economic war, and has made repeated calls for Turks to sell their dollars and euros to shore up the national currency.
“Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates. We will protect our economic independence by being tight-knit together,” he told members of his AK Party in a speech.
“We will impose a boycott on US electronic products. If they have iPhones, there is Samsung on the other side, and we have our own Vestel here,” he said, referring to the Turkish electronics company, whose shares rose five percent.
The United States has imposed sanctions on two Turkish ministers over the trial on terrorism charges of a US evangelical pastor in Turkey, and last week Washington raised tariffs on Turkish metal exports.
Erdogan said his government would offer further incentives to companies planning to invest in Turkey and said firms should not be put off by economic uncertainty.
“If we postpone our investments, if we convert our currency to foreign exchange because there’s danger, then we will have given into the enemy,” he said.
Although the lira enjoyed a small respite on Tuesday, investors say measures taken by the Central Bank on Monday to ensure liquidity fail to address the root cause of lira weakness.
“What you want to see is tight monetary policy, a tight fiscal policy and a recognition that there might be some short-term economic pain — but without it there’s just no credibility of promises to re-stabilize things,” said Craig Botham, Emerging Markets Economist at Schroders.
Dollar-denominated bonds issued by selected Turkish banks continued to fall on Tuesday, although sovereign bonds steadied.
Relations between NATO allies Turkey and the United States are at a low point, hurt by a series of issues from diverging interests in Syria, Ankara’s plan to buy Russian defense systems and the detention of an American pastor, Andrew Brunson.
The White House on Monday said US national security adviser John Bolton met Turkey’s ambassador to the United States to discuss the detention of Brunson. The pastor’s Turkish lawyer launched a fresh appeal on Tuesday for his release.
Traders said news that Finance Minister Berat Albayrak will hold a conference call with up to 1,000 investors to discuss the economy might also have helped support the currency.
“I think the investor call Albayrak has scheduled has helped lira firm,” said TEB Investment strategist Isik Okte. “I believe the new and important topics will be discussed in this call, otherwise there would not be such an attempt.”
“The concerns are ongoing in the market but it is possible to mention a limited optimism for the first time in a while,” a foreign exchange trader said.
Turkey’s business lobbies called on Tuesday for a tighter monetary policy to stabilize the lira, and for diplomacy to solve US-Turkish disputes.
Following Monday’s meeting between Bolton and Turkish ambassador Serdar Kilic, US officials have given no indication that the United States has been prepared to give ground in the standoff between the two countries’ leaders.
Ankara has repeatedly said the Brunson case was up to the courts and a Turkish judge moved Brunson from jail to house arrest in July. Infuriated by the move, which Washington said was insufficient, Trump sanctioned two Turkish ministers and doubled tariffs on metal imports, adding to the lira’s slide.
White House economic adviser Kevin Hassett said Treasury Secretary Steve Mnuchin was monitoring the financial situation in Turkey “very closely.”