That the US introduced a tax on steels and the import taxes against China indicate that this trade war will be a “bloody” one. As the main actors in this trade war are major countries, this indicates that the war is going to affect many emerging markets such as Turkey. According to experts, nothing will be the same over the next 10 years. As it is well known, the US introduced tariffs of to $60 billion in Chinese imports. The tariffs primarily target intellectual property and technology sectors. In response, China said it will retaliate. Following these developments, US and Chinese stock markets fell by up to 3 percent while the Japanese stock exchange rose by 4 percent.
But how will these developments affect Turkey? In the last week of March, the dollar rate against the TL reached 4.03 and the euro to 4.88; hitting historical heights. Another development was that the London interbank offered rate, or Libor, and rates on Treasury bills rose to levels not seen since 2008. The six-month London interbank funding rate rose to 2.27 percent in late March. This increase indicates that financing costs for companies have increased and that they will continue to increase in the period ahead.
‘Don’t borrow, find partners instead’
Deputy Prime Minister Mehmet Şimşek also warned companies about this. Stating that rates in global markets are on the rise, Şimşek suggested that instead of borrowing, companies should find partners and go into capital markets. He also said the Turkish government will introduce new legislation to limit borrowing in foreign currency. Economists agree with the minister: you can never be cautious enough as the signals about the period ahead don’t seem to be reassuring at all.