Turkey plans boycott on USA electronics

Turkey plans boycott on USA electronics

Its drop of as much as 18 per cent on Friday hit USA and European stocks as investors fretted about banks' exposure to Turkey.

Turkish President Recep Tayyip Erdogan has announced a boycott of electronic goods from the United States, including Apple products.

The US doubled tariffs last week over Turkey's refusal to extradite a US pastor who is imprisoned there.

What's happening to Turkey's currency?

The tariff increases come amid Trump's concerns over an American pastor, Andrew Brunson, imprisoned in Turkey since 2016.

The currency has been steadily declining for the past year.

While even a widespread Turkish boycott would do little to dent USA economic interests, it shows Erdogan refusing to give in to market turmoil that's pushed borrowing costs to record highs and threatens to descend the nation into a financial crisis. "Companies like Huawei, for example, which increased its smartphone shipments in Turkey by over 200 percent in the previous year", he added. Speculation is also growing that Turkish policy makers will heed calls from corporate and banking executives to raise interest rates to stem the rout.

Erdogan on Tuesday maintained that Turkey's economy was under attack and that the currency turmoil did not reflect its strength. But, foreign investors are concerned that the central bank may not act because of political interference.

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What about the Turkish economy?

Prices are already up 16 percent since past year, according to the Associated Press. Those loans are suddenly getting more expensive to repay, raising the possibility of corporate bankruptcies or bank failures. The European Central Bank has expressed concern about potential contagion through the eurozone banking system, with Spain, followed by Italy, the most heavily exposed countries. Share prices of major European and U.S. banks have fallen, given the risks that their outstanding loans to Turkey won't be repaid.

The lira held on to its earlier gains while Erdogan spoke and was trading 5.2 percent higher at 6.5457 per dollar at 12:59 p.m.in Istanbul. Other countries have much less exposure.

Turkey's Treasury and Finance Minister Berat Albayrak has said Ankara will continue taking steps within the rules of the free market. But American companies' direct contact with the Turkish economy is quite limited.

He sharply criticized the US for its trade policy, claiming that the ultimate goal was destabilizing Turkey.

"We view the policy of sanctions as unlawful and illegitimate, driven mostly by a desire to dominate everywhere and in everything, dictate policies and call shots in worldwide affairs", Lavrov said.

That doesn't mean there are no broader economic risks.

Turkey's currency crisis sent world markets reeling as investors in emerging markets sought safety in government bonds and the dollar. And there are already signs that it's dragging down markets in Asia. "Argentina and Brazil have been hit", wrote Brad McMillan, chief investment officer for Commonwealth Financial Network, on Friday.

"Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates".

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