President Tayyip Erdogan told Turks on Friday to sell their gold and U.S. dollars to support the country's currency which plunged after U.S. President Donald Trump escalated a feud with North Atlantic Treaty Organisation ally Turkey by doubling tariffs on metals imports.
The United States is the biggest destination for Turkish steel exports with 11 per cent of the Turkish export volume.
"The president launched his steel and aluminum tariffs on the grounds that maintaining a robust domestic metal industry was a core national-security interest of the United States, and that competition with metal imports was threatening to drive said industry into extinction".
Washington imposed the metals tariffs on national security grounds, claiming the glut of steel and aluminum harmed United States companies and the economy.
Turkish President Tayyip Erdogan told Turks to sell their gold and dollars to support the crumbling lira.
The lira sell-off has deepened concern over whether over-indebted Turkish companies will be able to pay back loans taken out in euros and dollars after years of overseas borrowing to fund a construction boom under Erdogan.
In what appears to be a diplomatic riposte, Turkey later said Erdogan had held a phone call with Russian President Vladimir Putin to discuss economic ties.
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Economist Chad Bown, who specialises in trade issues, said Turkey accounted for just over four percent of U.S. steel imports in 2017, but a very small fraction of the aluminum brought into the country.
Erdogan on Friday once again urged Turks to exchange gold and dollars into lira to stop the currency from plunging. Donald Trump's administration hit its justice and interior ministers with sanctions last week, a reaction to the detention of American pastor Andrew Brunson, who has has been held for almost two years over alleged links to political groups.
Some US officials say Turkey is holding Brunson as a bargaining chip after an executive at Turkey's state-owned Halkbank was convicted and imprisoned in the United States in May for helping Iran evade US sanctions.
Turkey's woes also shook world markets, pushing down stock indexes. He subscribes to the completely backward theory that lower interest rates cause lower inflation, which, now that he's given himself the power to pick the country's top central banker and made his son-in-law the finance minister, is actually being put to the test. Spoiler alert: It is not going well. Turkey has mostly done that to itself - until, that is, Trump started tweeting.
In the New York Times, Erdogan warned Washington not to risk relations with Ankara, saying otherwise his country would look for "new friends and allies". As recently as April the ratio was about four lira per dollar. If it fell much further, it might push a lot of Turkish banks and businesses that had borrowed in dollars into bankruptcy - assuming they did not get bailed out first.
It fell to a record low this morning, and has now dropped 18 per cent today to 6.5 lira to the dollar, compared with 5.5 lira last night, as a deepening monetary crisis and diplomatic relations with the U.S. deteriorated. "It just shows the importance of the evangelical vote in the U.S.as it heads to midterms".
Shares in France's BNP Paribas, Italy's UniCredit and Spain's BBVA, the banks seen as most exposed to Turkey, fell 4 per cent or more.
Marcus Chenevix, Middle East analyst at TS Lombard said that Turkey's economy is fragile.
Albayrak, who formerly served as energy minister, on Friday announced what he has described as a "new economic model" for Turkey but he focused on macro-economic issues and steered well clear of tackling the currency crisis.