Trump authorizes doubling of tariffs on Turkey's steel, aluminum

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Both currencies added to losses after U.S. President Donald Trump said he had authorized a doubling of tariffs on steel and aluminum imports from Turkey.

"It is hard to imagine how the United States and Turkey fix their relationship, which was already faltering, after this episode".

Fears over contagion even pushed global equity markets lower, with some European banks coming under heavy selling pressure due to their exposure to Turkey.

Just last week, Washington announced new sanctions on Turkish officials in response to the detention of an American pastor accused of supporting a 2016 failed coup against Turkish President Recep Tayyip Erdogan.

This year, it lost more than 40 per cent. The Dow Jones industrial average was down 280 points, or 1.1%, at 2:30 p.m. ET, while the S&P 500 was down 26 points, or 0.94%.

In modern economies, central banks are meant to be independent of governments to make sure they set policies that are best for the economy, not politicians.

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Turkish President Tayyip Erdogan told Turks to sell their gold and dollars to support the crumbling lira.

It said it would support steel and aluminium exporters on all global platforms, and the United States remained an important trade partner. "Repeated efforts to communicate to the United States administration that none of the stated criteria driving America's tariffs are applicable to Turkey have thus far proven fruitless", he said.

As well as the ongoing row with the United States, the recent sell-off in the lira has been fuelled by investor concerns over Erdogan's grip on monetary policy under a new powerful executive presidency.

Securing the release of Brunson, arrested in 2016, is a top priority for the United States, and it is also tussling with Turkey over the detention of three locally employed USA embassy staff, trade issues and differences over Syria.

Jay Sekulow, an attorney for Trump who is also representing Brunson's family, told talk-show host and political commentator Sean Hannity's radio program on Friday: "We're close to getting a resolution in that case".

Paul Greer at Fidelity International said dramatic interventions were now needed as Turkey faced a "downward spiral" of investor confidence.

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"Portfolio investors need to believe the story in terms of the policy mix - real interest rates need to stay sufficiently high to provide enough carry for FX risk", says Tim Ash, a strategist at BlueBay Asset Management, in an interview with Reuters.

But President Erdogan brushed off any concerns during a speech in the northeastern city of Bayburt on Friday, saying: 'The dollar can not block our path. It did not disclose details, but suggests Turkey might gravitate further away from its North Atlantic Treaty Organisation allies toward co-operation with Russian Federation, whose relations with the West are at their lowest since the Cold War.

A man checks foreign currency exchange rates outside a currency exchange shop in an Istanbul's market, Friday, Aug. 10, 2018.

Markets are deeply concerned over the direction of domestic economic policy under Erdogan with inflation at almost 16 percent but the central bank reluctant to raise rates in response.

Turkey's woes shook world markets, pushing down stock indexes and lifting the dollar, which traders around the world typically buy in times of concern. President Erdogan has pressured the central bank to maintain low interest rates by refraining from implementing much-needed hikes.

After winning a June election with revamped powers, Erdogan tightened his control over the central bank and appointed his son-in-law Berat Albayrak to head a newly-empowered finance ministry.

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