The unabated economic crisis of Turkey has taken a further nose dive, with Turkish Lira tumbling to almost 38% in a record low against dollar in a single year, after President Donald Trump’s tweet to double the US import tariffs on Turkish steel and aluminium. Amid the festering dispute between the two countries over the imprisonment of the US pastor Andrew Brunson, this move from Trump has plunged relations between the NATO allies to their lowest in decades. Turkish Lira’s freefall and rattling financial markets are the obvious side-effect of this bitter episode. “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! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time,” tweeted Donald Trump on August 10 to exhibit his indignation at the rather combative public speech by Turkish President Recep Tayyip Erdogan just a day earlier. The US is the biggest and most lucrative destination for Turkish steel exports that accounts for more than 11 per cent of the Turkish export volume. Trump’s new punitive measure will effectively expel the Turkish aluminium and steel from the US market.

Despite being close NATO allies for decades, the relations between the two countries have never been linear. There has been many ups and downs, but this time, courtesy the inflated arrogance of Donald Trump, things seem to be turning nastier with each passing day. Washington is overtly disturbed by the continued detention of pastor Brunson, a supporter of Mr. Fethullah Gulen who is on trial on terrorism charges for allegedly supporting a group that Ankara blames for a failed coup against Erdogan in 2016. Trump is vehemently supporting Brunson on behalf of the evangelical base and is seeking his extradition. In fact, the US government has already frozen US assets of two key important and influential Turkish ministers because of their role in the arrest of Brunson. “The United States will impose large sanctions on Turkey for their long time detainment of Pastor Andrew Brunson, a great Christian, family man and wonderful human being. He is suffering greatly. This innocent man of faith should be released immediately!” is how Donald Trump threatened to impose sanctions against Ankara in the last week of July. Not hollow threat. Trump moved quickly to implement his threat.

Responding to Trump’s aggressive steps, Turkish Lira, which has already been under severe pressure on foreign exchanges for the last 12 months dropping by almost 50% against the dollar, has further plunged 14% as investors rushed for the exits, preferring to buy the dollar, yen and other assets seen as safe havens during times of extreme volatility of financial market - giving a serious whack to Turkish economy where Inflation has reached an annual rate of 15.9% by the start of August (more than five times the average rate for wealthy nations) and government borrowing in foreign currencies has risen dangerously high. With that kind of erosion, Turkish Lira is now the third worst-performing in the world, after Venezuela, whose currency has practically collapsed to the ground, and Argentina. The outlook regarding the interest rates is also not bright. Argentina leads the interest rates list with 40 percent, which is followed by Venezuela (20.8), Iran (18), Turkey (17.75) and Nigeria (14). Very distressing situation on the economic front for Erdogan.

Though Tayyip Erdogan, having equipped with sweeping executive powers in recent elections, is trying his best to restore confidence in the Turkish currency through his typically outspoken speeches, laced with lofty nationalist rhetoric, but so far he has failed to put breaks on Lira’s downward spiral. “If they have their dollar, we have the people, we have Allah”, roared Erdogan in a public speech while inciting the Turkish nationalist sentiments. Certainly very motivating words for the common Turkish public whose vast majority now considers him a hero against the hegemonic imperialism of Trump. These words have worked well in winning the public support on home front, but they are creating more difficulties for him with regard to the fast melting Lira. His nationalist rhetoric, which are being “reciprocated” by equally aggressive tweets by Donald trump, is backfiring because the global financial markets see the tension between Trump and Erdogan to exacerbate to the point of diplomatic impasse. Any such intense and prolong standoff between Washington and Ankara does not augur well for the peace and stability in the Middle East, particularly in the Syrian imbroglio where Turkey is supposed to be an important stabilizing factor.

If viewed against the recent American sanctions against Iran, the situation is further complicated for Ankara as it tries to find a way out of one of the worst currency crises ever in its history. Trump has categorically warned that any country that trades with Iran will not be able to trade with the US. Yes, Turkey has already declared that it is not obliged to abide by any US sanctions on Iran, but still the Turkish economy will be under extra pressures since Turkey buys almost 44 per-cent of its oil from its eastern neighbour Iran with an annual trade volume of more $10.7 billion. The ultimate next impact of this episode will be the a possible hike in oil (and gas prices). Turkey’s other oil and natural gas source is Russia, its northern neighbour, also subjected to U.S. sanctions, and Turkey needs to import oil and gas in order to be able to put its rattling economy back on track. In fact, by Trump has made it easier for Erdogan to move towards its neighbours for support. In his opinion piece in The New York Times this week, Erdogan wrote, “Before it is too late, Washington must give up the misguided notion that our relationship can be asymmetrical and come to terms with the fact that Turkey has alternatives. Failure to reverse this trend of unilateralism and disrespect will require us to start looking for new friends and allies.”

So, Erdogan has an alternate plan. He knows well that Putin, despite his close links with Trump, will be ready to provide the shoulder to bail him out of the thick situation. Earlier this year, Erdogan displayed similar resistance to the Pentagon’s intense opposition to Turkey’s plan to acquire a Russian missile defense system. His assumption is that Trump will not squeeze Ankara to the limit of falling into the lap of others, particularly Moscow and Beijing. He is travelling to Iran on September 7 to have a trilateral summit involving Russians – a very shrewd move to put indirect pressure on Washington.

The US desperately needs the logistical support of Turkey to bolster its operations in Syria. Although Erdogan has struck a defiant tone – he has no other option but to put up a brave face - however his foreign ministry has called for “diplomacy and dialogue” to solve problems with Washington. This reflects an encouraging fact that pragmatism is still alive in Ankara, and Erdogan, in spite of his nationalist theme, is also aware of the prospects of collateral damage of too much stubbornness on both sides. Erdogan has effectively capitalized on the situation by projecting Turkey as a “victim” and getting support from his fellow countrymen as well as a sympathetic support from friendly countries – Qatar is the first one to come forward in this regard. Sooner or later, Erdogan and Trump will have to resort to the negotiating table – both can’t afford to let the situation to get out of control. After all, a destabilised Middle East theatre is a dreadful proposition.

The writer is a freelance columnist.

Sooner or later, Erdogan and Trump will have to resort to the negotiating table – both can’t afford to let the situation to get out of control.