The announcement via Twitter came as tensions between the two countries over the detention of US evangelical pastor Andrew Brunson
"I have just authorized a doubling of tariffs on steel and aluminium with respect to Turkey as [its] currency, the Turkish Lira, slides rapidly downward against our very strong dollar!” Trump posted on Twitter on Friday.
"Aluminium will now be 20% and steel 50%. Our relations with Turkey are not good at this time,” Trump added.
Turkey exported 1.8 million tonnes of steel products, worth about $1.2 billion, to the USA in 2017. The shipments to the US accounted for about 9% of Turkey's total steel exports, according to the Turkish Steel Producers Assn (TÇÜD).
Market participants in Turkey were mostly shocked by the decision and believe that Turkish exports into the US will completely stop, sources told Metal Bulletin.
“[The US] is just trying to increase the tension, but this will not be good for the US either. This will increase the domestic prices sharply in US market,” said a Turkish trading source. “This is going to be a contested divorce.”
A long steel mill source said: “This is a shocking news. Nobody can sell anything to US with 50% tariff.”
And another said Turkey should simply redirect its steel shipments.
“Turkey now should focus on other exports destinations immediately,” he said. “The domestic rebar market was helping the mills, but with the devaluation in [the Turkish] lira we should shift more material to exports.We can sell more billet to North Africa and maybe the Middle East, and rebar [can be redirected] to Southeast Asia.
“Sanctions against Iran could also help Turkey, as Iran’s usual buyers may turn to Turkey,” he added.
A 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 should instead implement changes to Section 232 gradually.
He said rapid changes would only create additional market shocks and make steel prices and customer inventory values more volatile.
A US East Coast trader agreed. He said it would be easier to manage business of Section 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.
US traders contacted by Metal Bulletin’s sister publication American Metal Market (AMM) had not been expecting increased tariffs on Turkish imports and were more concerned that Section 232 tariffs would be removed or eased on traditional US allies and trading partners - such as Canada, Mexico and the European Union, for example - while being left in place for other nations.
There had been fears after Trump announced a global Section 232 on March 1 that the duties might be increased.
Those fears stemmed in part from US commerce secretary Wilbur Ross recommendation in February this year that, instead of the global tariffs that Trump opted for, there would be 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.
But such fears have been 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 August 9.
However, it slumped again on Friday August 10 after Trump’s Twitter post and a failed meeting between the Nato allies.
Turkish lira was trading at TRY100 to $15.26-15.49 at 3pm UK time, according to Oanda.com.
Aluminium participants in the Turkish market were still digesting how the tariff increase would affect the market there.
Metal Bulletin price assessment for the p1020 cif duty-unpaid aluminium premium Tuesday August 7 was $125-135 per tonne, which has been at that level for the past three weeks.
Serife Durmus in Bursa, Michael Cowden in Pittsburgh and Justin Yang in London contributed to this report.