Turkey turmoil rocks world stock markets, euro falls

A U.S. Air Force A-10 Thunderbolt II departs Incirlik Air Base Turkey Jan. 20 2018

A U.S. Air Force A-10 Thunderbolt II departs Incirlik Air Base Turkey Jan. 20 2018

Trump said Friday on Twitter that he authorized a new 20 percent tariff on aluminum and 50 percent tariff on steel from Turkey.

Others feared this would drive Turkey closer to Russian Federation, and possibly affect US-Turkish cooperation in Syria.

Trump raised the stakes on Friday when he said that his administration would double its tariffs on Turkish steel and aluminum.

Washington and Ankara have been at odds for months over an American pastor detained in Turkey, the Syrian civil war and other diplomatic issues.

Turkey's President Tayyip Erdogan told Turks to exchange gold and dollars into lira as the country's currency plunged as much as 14%.

Last week, Erdogan called on Turks to convert their foreign currency and gold into Turkish lira to help the currency.

Reverberations spread through global markets, with European stockmarkets especially hit as investors took fright over banks' exposure to Turkey. "The tweet is mightier than the Turkish sword", Cristian Maggio, head of emerging markets strategy at TD Securities, said in a note to clients, with reference to Trump's comments. But given that Turkey is in the midst of an economic crisis, it might prove an effective one.

Consistently deteriorating relations between the USA and Turkey over recent years have risen to alarming levels, dealing a severe blow to both Turkey's economy and its currency.

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The President announced the stiff tariffs on social media Friday morning, saying he was "authorizing a doubling of tariffs on steel and aluminum with respect to Turkey". But this seems less likely as Erdogan and his mouthpieces in the media cast the United States' moves as some kind of epic battle to wreck Turkey, and Trump just gave them fresh ammunition.

Turkey remains at loggerheads with the United States in one of the worst spats between the two North Atlantic Treaty Organisation allies in years over the detention for the last two years of American pastor Andrew Brunson and a host of other issues. He equated the financial turmoil to the 2016 coup attempt that sought to depose him.

Investors piled into "safe" government debt, with German yields hitting three-week lows and the yield on the benchmark US 10-year Treasury note falling to 2.8750 percent as investors sought its safety.

Unfortunately, this still isn't a good reason for Trump's latest trade action - because it is an illegal one. Negotiations for his release broke down when Turkey refused to free Brunson after his third courtroom hearing on July 18.

Just weeks ago, Trump was reported to have fist-bumped Erdogan during a North Atlantic Treaty Organisation meeting in Brussels.

According to the Washington Post, Mr Trump and Mr Erdogan agreed on a deal that would release Mr Brunson and, in exchange, Turkish national Ebru Ozkhan would be released by Israel.

"We are in uncharted waters here".

In addition to the Brunson case, Washington is seeking the release of three locally employed US embassy staff.

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