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Turkey's Erdogan Slams U.S. Over Tariff Move

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08/11/2018 | 06:25pm CET

By David Gauthier-Villars

ISTANBUL -- Turkey's President Recep Tayyip Erdogan lashed out at the U.S., blaming the Trump administration for stoking confrontational relations that have helped send the Turkish lira into a tailspin.

In several speeches in the Black Sea region on Saturday, Mr. Erdogan said that President Trump's decision to impose sanctions and tariffs on Turkey after months of negotiations failed to free an American pastor facing terrorism charges risked jeopardizing decades of partnership between the two North Atlantic Treaty Organization allies.

The Turkish leader said the dollar, which rose sharply against the lira, was tantamount to a "missile" launched as part of an economic attack on Turkey, adding that Ankara was preparing to shun the U.S. currency when trading with countries such as China and Russia.

Mr. Erdogan had earlier warned in an opinion piece for the New York Times that Turkey would seek "new friends and allies" if Washington didn't reverse course.

"Shame on you, shame on you," Mr. Erdogan said in his speech to supporters in the Black Sea town of Unye. "You are swapping your strategic partner in NATO for a pastor."

Mr. Erdogan's barrage of speeches, which came a day after Mr. Trump announced punitive tariffs on some Turkish imports, could herald further escalation because the White House has vowed to pile pressure on Turkey until the pastor, Andrew Brunson, is on a plane to the U.S.

The deteriorating climate in U.S.-Turkey relations and renewed investor concerns about Turkish corporations' ability to honor a hefty debt load snowballed on Friday, causing panic on currency markets where the lira fell 17%.

Turkey's Finance Minister Berat Albayrak -- Mr. Erdogan's son-in-law -- held a news conference on Friday to outline his economic strategy. But short on details, the presentation failed to reassure investors the government has a plan to stop the lira's fall, boding for a chaotic reopening on currency and stock markets on Monday.

Most Turkish newspapers quoted Mr. Erdogan on their front pages Saturday saying Turkey would "win the economic war," with the pro-government Sabah saying the fall in the lira was the result of an attack comparable to the 2016 military coup attempt against the president.

Cumhuriyet, a rare independent voice in Turkey's media landscape, explained how the lira had lost 94% of its value against the dollar in the past 12 months under a banner headline that said: "The crash of a model," a reference to Mr. Erdogan's policies.

Mr. Trump's announcement that he would double steel and aluminum tariffs on Turkey, a move that would prevent Turkish exports from becoming cheaper with the lira's fall, has exacerbated worries of a full-blown trade war between the two countries. It came less than two weeks after Mr. Trump imposed sanctions against two top Turkish officials over the country's refusal to free Mr. Brunson.

By the end of New York's trading day Friday, a dollar bought 6.43 lira, a decline of 41% from the start of the year. The Dow Jones Industrial Average slumped 196 points or 0.8% to 25313, its third straight decline, while the dollar rose to a one-year high. In Europe, Turkey's woes hit shares in Spanish, Italian and French banks with large exposure to the Turkish economy.

The lira's rough ride was a far cry from Mr. Erdogan's promise that the near-absolute executive powers he gained upon winning re-election under an amended constitution in June would allow him to fix Turkey's economic challenges.

Despite accelerating inflation, which hit 16% last month, Turkey's central bank has kept its main lending rate steady since the election, fueling investor concern that it lacked the necessary independence from the government to fulfill its mandate.

Analysts and investors increasingly fear that Turkish businesses will struggle to pay down a debt load exceeding $300 billion because the bulk of it isn't backed by a steady revenue stream.

Turkey's external debt ranks among the largest among developing economies as a share of annual output, and its foreign-reserve pot is among the smallest, data from the World Bank and the International Monetary Fund show.

--Yeliz Candemir contributed to this article.

Write to David Gauthier-Villars at David.Gauthier-Villars@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.30% 25352.23 Delayed Quote.1.46%
NASDAQ 100 -0.60% 6844.1688 Delayed Quote.6.76%
NASDAQ COMP. -0.47% 7219.982 Delayed Quote.4.31%
S&P 500 0.03% 2729.56 Delayed Quote.1.05%
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