Turkey to Boycott US Goods, Erdogan ‘Ready for War’

President Recep Tayyip Erdogan said Turkey will boycott electronic products from the United States, retaliating in a dispute with Washington that has contributed to a Turkish currency crisis.

“We will impose a boycott on U.S. electronic products. If they have iPhones, there is Samsung on the other side,” Erdogan said at an assembly of his AK Party members in Ankara on Aug. 14.

Erdogan vowed to substitute foreign imports with domestically produced goods.

Turkish president Recep Tayyip Erdogan told an assembly of politicians that Turkey will boycott U.S. electronic products in Ankara on Aug. 14. Turkish Presidency Pool via Reuters

“We will produce every product we are importing from abroad with foreign currency here and we will be the ones exporting these products,” he said.

“And we have our own Vestel here,” Erdogan said, referring to the Turkish electronics company, whose shares rose 5 percent.

Turkey ‘Ready for War’

According to the Turkish news service Ahval, Erdogan met with ambassadors on Monday, Aug. 13, and said that Turkey is ready for war.

It was unclear whether Erdogan was referring to a trade war, or whether he was making a statement about military preparedness.

“The secret to successful states is their readiness for war. We are ready with everything we have,” Erdogan said, according to Ahval.

“It is everyone’s observation that the developments in foreign currency exchange have no financial basis and they are an attack on our country,” Erdogan said.

“On the one hand you are a strategic ally and on the other you shoot [the country] in the foot. Is something like this acceptable?” he asked, seemingly in reference to U.S. sanctions and increased tariffs.

US Sanctions and Tariffs

The United States has imposed sanctions on two Turkish ministers over the trial on terrorism charges of an American evangelical pastor in Turkey, and last week Washington raised tariffs on exports of Turkish aluminum and steel.

Turkish lira banknotes are pictured at a currency exchange office in Istanbul, Turkey on Aug. 13, 2018. Reuters/Murad Sezer

The Turkish lira hit an all-time low of 7.24 to the dollar on Monday, Aug. 13, driven down by concerns over Erdogan’s calls for the central bank to loosen monetary policy, and by deteriorating ties with the United States.

The lira rallied to 6.53 against the dollar on Tuesday, buoyed perhaps by news of a forthcoming conference call between the Turkish finance minister and about 1,000 investors.

On Thursday, Aug. 16, finance minister Berat Albayrak will seek to reassure investors concerned by Erdogan’s control of the economy and his resistance to interest rate hikes to tackle double-digit inflation.

Calls for Higher Interest Rates

Experts say any impact of the anticipated call with the finance minister is temporary, and markets need more than technical remedies like the central bank’s promise to provide emergency liquidity to banks, or the government’s promise not to seize dollar-denominated bank deposits.

While low interest rates inject money into the economy and can provide stimulus in times of crisis, rampant inflation undercuts these gains.

Raising interest rates is needed to calm markets and stem the lira’s sell-off.

“What you want to see is tight monetary policy, a tight fiscal policy, and a recognition that there might be some short-term economic pain—but without it there’s just no credibility of promises to restabilize things,” said Craig Botham, Emerging Markets Economist at Schroders.

Economists warn the currency crisis could spill over into full-blown economic recession.

“The plunge in the lira, which began in May, now looks certain to push the Turkish economy into recession,” Andrew Kenningham, chief global economist at Capital Economics, told Reuters.

Turkey’s business lobbies have also called for a tighter monetary policy to stabilize the lira, and for a diplomatic solution to the United States-Turkish dispute.

Reuters contributed to this report.