President Donald Trump has authorized higher Section 232 tariffs on US imports from Turkey, imposing a 20% duty on aluminium and 50% duty on steel, he said via Twitter on Friday August 10.
“I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar!” Sanctions against Iran could also help Turkey, as Iran’s usual buyers may turn to Turkey.”
Another trading source in Turkey agreed.
“This is an economic war and this looks like just the beginning,” he said. “The Turkish steel sector will have to remain competitive to keep its other export markets [mainly Europe], so prices cannot increase.”
Sources in the US market were not happy about the decision either.
The Trump administration should try to avoid “picking winners and losers” with Section 232, one Gulf Coast trader said, adding that the administration instead should gradually implement changes to the 232 trade measures. Rapid changes would only create additional market shocks and make steel prices and customer inventory values more volatile, according to the Gulf Coast trader.
A US East Coast trader agreed, noting that it would be easier to manage business if the 232 tariffs were applied equally to all imports or not applied at all. The hardest landscape to navigate is one where different countries are subject to different duty regimes, he said.
And other US trader sources indicated that they had not been expecting increased tariffs on Turkish imports. Instead, many had been more concerned that the 232 tariffs would be removed or eased on traditional US allies and trading partners - such as Canada, Mexico and the European Union - while being left in place for other nations.
Still, others had anticipated a duty increase after Trump announced a global Section 232 on March 1.
That expectation stemmed in part from recommendations made by US Commerce Secretary Wilbur Ross in February this year. Instead of the global tariffs that Trump opted for, Ross had favored a more targeted duty of at least 53% on steel imports from 12 countries: Brazil, China, Costa Rica, Egypt, India, Malaysia, South Korea, Russia, South Africa, Thailand, Turkey and Vietnam.
“This is exactly what I was worried about: Trump increasing the sanctions on any given country, at any time," another trader source said. "If [the higher tariffs are] effective immediately, a lot of importers will be hurt.”
Still, such fears had been largely absent in recent weeks. Concerns had instead shifted to what might happen if and when Section 232 ended.
The Turkish lira continued to lose value this week - a trend exacerbated by Turkey's detention of Brunson.
The lira suffered its biggest daily fall in nearly a decade on Monday August 6, after Trump's administration said it would review Turkey’s duty-free access to the US market. The lira was trading at TRY100 to $19.64 on August 6, compared with TRY100 to $21.58 on July 6, and TRY100 to $28.33 on August 6, 2017, according to exchange rate website Oanda.com.
Following the apparent failed attempt to resolve the dispute by a Turkish delegation and US officials, the lira was trading at TRY100 to $18.96 on Thursday August 9. It slumped again on August 10, however, after Trump’s Twitter post and a failed meeting between the North Atlantic Treaty Organization allies.
The Turkish lira was seen trading at TRY100 to $15.26-15.49 on Friday, according to Oanda.com.
Aluminium participants in the Turkish market were still digesting how the tariff increase would affect the market there.
Metal Bulletin assessed Turkey's P1020 cif duty-unpaid aluminium premium at $125-135 per tonne on Tuesday August 7, where it has remained since July 24.
Serife Durmus, Bursa, Turkey; Michael Cowden, Pittsburgh; and Justin Yang, London, contributed to this report.