Turkey's president: U.S. waging "economic war" against Turkey

Turkish President Recep Tayyip Erdogan arrives at the 2018 NATO Summit at NATO headquarters in Brussels Belgium

Lira crashes as US slaps tariffs on Turkey

"If they have their dollar, we have the people, we have Allah, " he said.

A Turkish man waits to change his US dollars with Turkish liras inside a currency exchange shop in Ankara, Aug. 10, 2018.

Turkish President Recep Tayyip Erdogan has denied that his country is in a currency crisis, insisting that the plunge of the lira is merely a result of what he called "fluctuations".

"Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks".

"I'm not aware of any prior administration using tariffs in this way, and there's a very simple reason: because they're an incredibly blunt instrument that often can have blowback on American workers and consumers as we've seen in the China context", said Ned Price, a former Central Intelligence Agency officer who also served as a National Security Council spokesman during the Obama administration.

Turkey is also frustrated at USA unwillingness to extradite Turkish cleric Fetullah Gulen, who Erdogan accuses of staging a failed 2016 coup attempt. Trump and Vice President Mike Pence threatened on July 26 to impose sanctions on Turkey if the pastor is not set free and allowed to return to the United States.

Trump said he had authorized higher tariffs on imports from Turkey, imposing a 20 percent duty on aluminum and 50 percent one on steel. "Look at what we were 16 years ago and look at us now", he said. "The dollar, the mollar, will not cut our path", said Erdogan, using a figure of speech he repeatedly uses to mock something.

"These are the bullets, cannonballs and missiles of an economic war waged against our country", he said.

The lira has lost more than 40 percent this year.

The external value of the lira is not a prime concern of Mr Erdogan's core supporters, many of whom have no plans for foreign holidays and readily accept government rhetoric that economic problems are caused by outsiders seeking to weaken Turkey.

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

Turkey is now under a 25 percent tariff on imported steel and 10 percent on aluminum, which went into effect in March.

Gyorgy Kovacs, the chief economist for EMEA emerging markets at UBS, pointed out that a massive rate hike of between 350 to 400 basis points would be "consistent with real rate levels that in the past helped to stabilize the currency".

He also condemned as "unacceptable, irrational and ultimately detrimental", the sanctions imposed by the USA on several Turkish cabinet members over the Brunson issue.

Ties between the countries have been strained as Washington has urged Ankara to release Andrew Brunson, an American pastor being held under house arrest on terrorism charges.

Erdogan has said Turkey was not afraid of "threats" and will find "alternatives" for economic cooperation in many places "from Iran, to Russian Federation, to China and some European countries".

The 64-year-old also highlighted the major difficulty in battling the Kurdish insurgency which has full U.S. support for fighting Islamic State fighters in northern Syria. His comments on interest rates - and his recent appointment of his son-in-law as finance minister - have heightened perceptions that the central bank is not independent.

"Erdogan's aim is to improve the economic position of households", she said, adding the government wanted to "keep the music playing" even as external and internal imbalances grow.

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

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