Cold Turkey
US’s trade war with an ally is sending out ripples of turbulence, financial and strategic
President Donald Trump doubled duties on Turkish metals, and President Recep Tayyip Erdogan retaliated against US automobiles and cosmetics
The ongoing escalation between the US and Turkey, after an American pastor was arrested on suspicion of terrorism, showcases a bumbling trade war. The US could have persuaded Ankara diplomatically, but instead, President Donald Trump doubled duties on Turkish metals, and President Recep Tayyip Erdogan retaliated against US automobiles and cosmetics. Plot synopsis: Maybelline is suffering attacks over an evangelist, and world markets are rattled. The multilateral rules-based trading system runs on the assumption of maturity, rather than childish pique. But this is a clash between two men who cannot back off for fear of looking weak, and it is escalating Turkey’s economic troubles into a situation that could send out ripples of turbulence, financial and strategic. In the midst of a currency and external debt crisis, the added pressure has sent the lira into a flat spin. Inflation will rise if the standoff persists, and there would be implications for the prospects of Turkey, and the idea of the West.
Though fears of spreading contagion were exaggerated, the fall of the lira did affect banks, international markets and currencies, including the rupee. Among other international effects, the possibility of Turkey joining the European Union — once considered a certainty — seems more remote than ever before. Erdogan is preventing his central bank from hiking interest rates, and he is unlikely to go to the International Monetary Fund, for that would signal acceptance of US terms. Nato is also under strain, with the US in a trade war with a reliable member, which also happens to be a strategically important nation which has historically controlled the crossroads of the Old World. The only way out would be for Trump to stand down, as he did to engage with North Korea. But this time, it seems an unlikely outcome.
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