Global tariffs trade shake off & Turkish lira inflation

The currency crisis (inflation) of the Turkish national currency Lira — has been no surprise to market, in fact the stability of the currency in Turkey is deteriorating by a progressive annual inflation rate and it dates back to 2016, along with diplomatic, commercial and strategic deterioration relations between Ankara and Washington that down spiraled rapidly especially since Trump election and his priorities vigorously promoted during the campaign that of the necessity of trade balance , economic growth vowing to ‘ drain the swamp’ and the famous Mexican wall implementation, have had its effect on global scale including Turkey.

But what is the current buzz behind the global economic scene, is America’s economy through re-balancing tariffs has entered into the new chapter of US economical exceptionalism towards their global partners and along the road made few shakes within ?

Targeting and leveling of tariffs especially towards the countries that have used the market with a minimum export tax in the US, but with high taxes on imports of US-produced products as a result of this disharmony and trade inequity has produced a leverage point to states like China,Mexico, Russia…. and Turkey to grow rapidly especially over the last decades of 21st century.

With the famous slogans “America first” & “ MAGA” Trump without hesitation began implementing impeccable measures to improve trade tariffs , not only towards China, who inevitably suffered from tax re-balancing of dozens specific products,including the technological micro devices among the steel and aluminium , calm before the storm adoption policies has created an avalanche of reaction from China to Turkey, How did this affected unprecedented inflation of the Turkish lira!? is the tariffs increase of aluminum and steel exclusively to blame for the inflation? on the other side identical measures have been implemented by Turkey towards USA for many years starting from clothing and alcohol products, furniture, household appliances, cosmetics, and targeting one of the most influential sectors in the US, The pills industry known as ‘big pharma’ the pharmaceuticals, where according to the statistics provided by http://madb.europa.eu/madb/barriers_details.htm?barrier_id=10962

Reveals that Turkey has applied protective policies to the highly sensitive sector in Turkey and very powerful in America, (Pharmaceuticals), these protective policies on economic terms better known as ‘Protectionist measures’ have ignited the reaction of the Pharmaceutical Community in America as they were directly affected by these extremely unfavorable measures for their limited bidding market as outlined in “64th Action Plan of the Turkish government for 2016”

As Indicated on official site http://www.kalkinma.gov.tr/Lists/Yaynlar/Attachments/691/MediumTermProgramme%202016-2018.pdf stating ‘the Turkish Ministry of Health requests foreign suppliers of certain pharmaceutical products (Annex 2) to produce through a local Turkish company. All affected companies of the selected group of products for localization were requested to submit their localization plans until April 2016. The products for which localization plans were rejected will be de-listed from the reimbursement list of the social security institution as of 2018. Moreover, certain pharmaceutical products shall only be produced locally after 2017. Those pharmaceuticals of foreign production will automatically lose their reimbursement status and costs will not be refunded by Turkish health insurance even though they are prescribed’.

Such measures in favor of the local production protection have caused a significant loss of market share of foreign pharmaceutical companies. Therefore the risk was enormous for the US Pharmaceutical companies to try to penetrate the Turkish market.

Spearheaded by Turkish Administration under the Erdogan’s patronage, with the main aim boosting the local production of the Turkish recovery and promotion of local products of the pharmaceutical sector and in general local made production followed by policy zero tax duties, Turkey gains momentum and through the course of action of means justify the purpose, the Turkish government protectionist measures achieve positive results and pharmaceutical production boosted on sales and revenues achieving extraordinary results, according to a study published by the

Turkish Pharmaceutical Association ( http www.ieis.org.tr/ieis/assets/mehia/Raporlar/TR_Pharma_Market2016.pdf0 analysis of the six-year period between 2010 and 2016 shows that the pharmaceutical market grew by 55% and the pharmaceutics imports significantly decreased from the foreign countries, in addition the export showed improvement and Turkey not only supplied most of its local market but also targeted and successfully penetrated the regional global market as well .

Other relevant factors that contributed to the current affair of trade war and lira inflation, one cannot bypass the following;

· Military offensive against Kurdish forces, in Syria

· Diplomatic & trade relations with Iran, Qatar

· Arrest of US Pastor Andrew Bronson

Turkish military offensive , in Syria implication on already complicated conflict and jeopardizing the US security armed forces in Syria during the offensive in town of Afrin, has been a starting downfall of Us –Turkey love affair, in fact the military operation undertaken by Turkey has , fortunately not resulted in any American personnel casualties, but caused large losses of allied Kurdish forces and created unprecedented scenario and provocation in modern Geo-politics, between the two formal NATO allies.

Mr. Erodgan no doubt strengthened his position as undisputed Turkish leader and made another obscure strategic step on strengthening diplomatic trade relations with Iran,( followed by debt increase from Iran) and sudden investment$15 billion pledge plan from Qatar makes the trade turned into jigsaw proxy-game, the stubborn approach of Turkey together with Iran and Russia to impose as a key players on Syrian issue, all these moves gives the EU skeptic countries a perfect reasoning towards Turkey claim joining the Eu Schengen zone to be considered a distant future…. and a diplomatic leverage for US Administration to shift the mood and reassess the principal NATO agreement between the allies, and that comes in response to the continuous demands of the US Administration that qualifies the Iranian regime as the main sponsor of terrorist networks in The Middle East, furthermore to make things go from bad to worse comes another blow to Us-Turkish partnership when an American Pastor (Andrew Bronson) is arrested & accused of espionage and active role in the coup d’état of 2015

This move has been evaluated as an tit for tat exchange-attempted bargain style with US for the extradition of the Erdogan’s enemy number one, Mr. Fetullah Gülen, and the last on the pecking order is the very recent initial military attempt-agreement for the purchase of the Russian anti-missile system, knowing the fact that the Russia today is seen as main threat to the NATO this not only complicated the matter but could have tied the knot of agree to disagree relations between US/Turkey as never before in modern history.

Gradual decline and inflation of Lira has been noted soon after US increased tariffs on the import of Turkish goods, mainly steel and aluminum, consequently the market reaction of sudden fall of shares & commodities led towards the re-evaluation of foreign investors and withdrawal from investment as speculation that they could lose their investment due to rate of return will be lower than initial investment portfolio due to lira inflation and market uncertainties mainly focused at road infrastructure, construction and the Utopian project of the world’s largest airport have suffered drawbacks and significantly stagnated, while the issue of the Lira crisis and the US Tariffs topics will allow Erdogan that for his country’s economic vow’s to shift blame towards western countries, mainly US ‘Hostility; towards ‘prosperous’ Turkey undermining every role of his wrongdoings of the lira inflation and tenting to disguise the incompetence and indifference of his government in this regard, and even the potential release of the detained Pastor will not help repair the damages caused from a nationalistic embroiled with Islamic sentiment ruling, all that in the name of justice.

Last but not least important, with PayPal’s decision to ban the operation in Turkey, many individuals and businesses have turned the focus towards bitcoin, not just because of international transaction, but also the current low market price after many fluctuations since reaching peak on December 2017, many Turkish citizens seems to have found the perfect way to continue their daily life with the unpredictable leadership and unstable national currency, hoping and praying their President will not follow the path of his colleague Maduro in Venezuela

Fintech heterodox & Innovation writer/ Author (SALFORD/ IFLAS Alumnus)