Erdogan calls on Turks to buy lira 'in response to economic war'

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Earlier on Friday the lira plunged as much as 14 percent on as worries about Erdogan's influence over monetary policy and worsening USA relations snowballed into a market panic that also hit shares of European banks.

He said he had authorized higher tariffs on imports from the United States' NATO ally, imposing duties of 20 percent on aluminum and 50 percent on steel.

The US president revealed the action on Friday as he noted how the Turkish lira "slides rapidly downward" against the "very strong" US dollar.

The United States has increasingly used economic sanctions against foes such as Iran or North Korea but it is highly unusual for an administration to impose import tariffs over political or judicial issues with other countries.

The New York Times suggested that Trump could also be trying to offset the effects of Turkey's weakened currency on the existing tariffs.

Trump tweeted on Friday that he would be doubling existing tariffs on steel and aluminum imports from Turkey.

President Tayyip Erdogan told Turks to exchange gold and dollars into lira as the currency tumbled after President Donald Trump doubled US tariffs on metals imports from Turkey.

He told supporters to "change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks".

Friday's announcement could further escalate tensions with Turkey, which continues to detain Andrew Brunson, an American pastor Ankara accuses of helping plot a 2016 coup attempt against Turkish President Recep Tayyip Erdogan.

But Aykan Erdemir, of the Foundation for Defense of Democracies, said Mr Trump's tariffs announcement comes "at the worst possible time for Mr Erdogan" and fits with USA strategy to increase pressure on Ankara until Mr Brunson is released.

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The Turkish president on Friday dismissed such concerns and called for people to defend the currency. At the beginning of August, the U.S. Treasury Department sanctioned Turkey's ministers of Justice and Interior because of Brunson's detainment.

The tumble in Turkey's currency on Friday signaled deepening pessimism about the country's economy after months of market declines. Which is why Trump's tweet made it fall even further than Erdogan's reality-starved speech had already made it.

"The Turks can export to many other countries, but with a weak lira, their products become cheaper to buy".

A statement from the Kremlin said the two leaders discussed economic and trade ties.

What's happening to Turkey's currency right now?

Such a stabilisation project would have to involve not just a sharp increase in interest rates, but also a full comprehensive programme of reforms, and - what would probably be a very bitter pill - the shelving of many of Erdogan's expansive infrastructural and defence industry projects, 400 of which were unveiled only a few days ago.

"If they have their dollar, we have the people, we have Allah", he said, as the lira continued to fall.

The defiant tone and war rhetoric only hurt the lira more, before Erdogan's finance chief and son-in-law, Berat Albayrak, tried to ease investor concerns during a conference, saying the government would safeguard the independence of the central bank.

UBS chief economist for EMEA emerging markets Gyorgy Kovacs said a giant rate hike of 350-400 basis points would be "consistent with real rate levels that in the past helped to stabilise the currency" but warned a deal to normalise ties with the United States may also be needed.

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