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Already Frayed, U.S.-Turkey Ties Take Another Hit Over Steel Tariffs
Turkish President Recep Tayyip Erdogan (left) meets with US President Donald Trump at the White House in May 2017. (Michael Reynolds-Pool/Getty Images)

Already Frayed, U.S.-Turkey Ties Take Another Hit Over Steel Tariffs

Turkey is the eighth-largest steel producer in the world and the sixth-largest exporter of the metal to the U.S.

The Turkish steel industry is bracing for the impact of newly-introduced U.S. tariffs, but analysts are warning Ankara not to over-react.

U.S. President Donald Trump ruffled the feathers of some of his allies when announcing the protectionist measures—duties of 25 percent on foreign-made steel and 10 percent for aluminum—which took effect on Friday. The European Union and a handful of other countries were exempted, however, Turkey was not.

Ankara is the eighth-largest steel producer in the world and the sixth-largest exporter of the metal to the U.S., accounting for 5.6 percent of the country’s steel imports.

Turkish officials have signaled the government could respond by imposing its own tariffs against Washington.

“Such measures will hit Turkish importers, producers and exporters. If they complain…then we will assess the situation and are more likely to take retaliatory measures,” Turkish Economic Minister Nihat Zeybekci was quoted as saying by Hurriyet Daily News.

Shortly thereafter, an adviser to Turkish President Recep Tayyip Erdogan wrote in a local newspaper that Ankara may impose tariffs on American-made cotton. Turkey has a large textile industry with factories supplying international companies such as Zara, Adidas and Nike.

“It’s clear that Turkey will be effected negatively but it would be unwise for Turkey to react strongly immediately,” Duke University Professor of Economics and Political Science Timur Kuran told The Media Line. “Turkey has benefited a great deal from free trade and it should avoid taking steps that will inflame American public opinion, leading perhaps to further tariffs.”

Kuran noted that President Trump’s decision could be short-lived as an increase in U.S. steel prices could apply pressure on Washington to scrap the tariffs, possibly within a few months. Nevertheless, he believes Ankara should take the case to the World Trade Organization, although a U.S. official was cited last week as saying that the new duties are “consistent” with the WTO’s General Agreement on Tariffs and Trade.

The tariffs come as Washington and Ankara have been trying to mend ties. This week, the U.S. dropped most of the charges against Turkish security officials over a fight that broke out with protesters in Washington last year. The two countries  also are currently in talks for Ankara to buy an American-made missile system after NATO, of which Turkey is a member, raised fears over an arms deal between Ankara and Moscow.

But any negative effects on Turkish industry will likely raise tensions, as Erdogan heads towards a presidential election next year amid a struggling economy.

Turkey’s inflation rate has remained high and its currency, the lira, has been on a downward slide. In fact, at one point on Friday it reached a record low of 4.0375 to the U.S. dollar.

Oguz Satici, the former president of the Turkish Exporters Assembly, said that because the tariffs are being imposed on most nations, they might be well-served to form a unified position to push back against the move.

“The [response] can turn into a possible collective action which may even trigger a global trade [war] between countries and economic regions.… However, the biggest [response] would not be coming from the other countries but from the U.S. citizens themselves,” Satici wrote in an email to The Media Line. He explained that Americans could be put off by the expected rise in steel prices and associated products such as cars, appliances and other consumer goods.

Indeed, the risk of a trade war increased after the U.S. announced plans also to impose tariffs on some $60 billion of Chinese goods, in addition to placing restrictions on Beijing’s investments in the U.S.

In response, China said it is preparing to retaliate and that it is not afraid to engage in a trade war.

This could, in turn, have an upside for Turkey, according to Ohio State University’s Ned Hill, an economist focusing on manufacturing. If the U.S. imposes penalties on China, apparel companies could seek out manufacturing alternatives, which may mean new business for Turkey’s textile industry.

“[It] gets pretty complicated,” Hill concluded, “American consumers aren’t going to sit there and say ‘Whoopee! Our clothing prices just went up by 10 percent.”

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