ISTANBUL (Reuters) – Turkey doubled tariffs on some US imports including cars, alcohol and tobacco on Wednesday in retaliation for US moves, but the lira rallied a further six percent after a fresh move by banking authorities to underpin the currency.
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Ankara acted amid increased tension between the two NATO allies over Turkey’s detention of a pastor and other diplomatic issues, which have helped to send the lira tumbling to record lows against the dollar.
The rebound in the Turkish currency to stronger than 6.0 against the dollar was driven by a banking watchdog’s step to limit swap transactions and by hopes of improved relations with the European Union.
Last Friday, US President Donald Trump said he had authorised higher tariffs on aluminium and steel imports from Turkey.
A decree published in Turkey’s Official Gazette and signed by President Tayyip Erdogan, doubled the tariffs on passenger cars to 120 percent, on alcoholic drinks to 140 percent and on leaf tobacco to 60 percent.
Tariffs were also doubled on goods such as cosmetics, rice and coal.
“The import duties were increased on some products, under the principle of reciprocity, in response to the US administration’s deliberate attacks on our economy,” Vice President Fuat Oktay wrote on Twitter.
The row with Washington has helped drive the lira to record lows, with the currency losing more than 40 percent of its value against the dollar this year, prompting central bank liquidity moves to support it.
The lira rebounded some 8 percent on Tuesday, helped by news of a planned conference call on Thursday in which the finance minister will seek to reassure international investors.
Markets are concerned by Mr Erdogan’s influence over the economy and his resistance to interest rate increases to tackle double-digit inflation.
Yesterday, the lira traded at 6.4125 to the US dollar, weakening from a close of 6.3577 a day earlier.
Mr Erdogan has said Turkey is the target of an economic war, and has made repeated calls for Turks to sell their dollars and euros to shore up the currency. On Tuesday, he said Turkey would boycott US electronic products.