The Turkish Lira is continuing to lose ground against the US Dollar as the political and economic turbulence between the two countries worsens. What started as a political problem regarding the release of an American citizen being detained by Turkey on terrorism charges has now become a full-blown trade war between the two nations. The US has imposed tariffs on imports from Turkey which prompted a direct response. Investors are now losing confidence in the ability of the two leaders to restore the relationship and reverse the decline of the lira.
Experts fear a collapse
Experts are concerned that the Turkish economy may collapse completely if the current situation is allowed to continue. President Donald Trump has announced that the US has no intention of lifting the tariffs imposed on Turkish products. According to the American Turkish Council, a 320 million US dollar merger deal between a Turkish and American company has been placed on hold indefinitely due to the current political climate in the country. There is a real danger that the feud may severely hurt the Turkish economy and eventually affect other European economies.
Turkey is viewing the tariffs imposed by the US as an act of economic war and has announced that they will find other ways of trading that do not rely on US support. After a request of president Erdogan, Turkish citizens could be seen smashing iPhones in protest to the US tariffs.
It seems that the Turkish central bank would need to urgently impose remedial actions to prevent the Turkish economy from entering a free fall from which it would not be able to recover without assistance from the EU. Chancellor Angela Merkel has already ruled out any EU assistance package to help the Turkish economy hold it's ground in the face of the US tariffs.