In Depth

Fact check: can the US ‘devastate’ Turkey’s economy?

Donald Trump is threatening the Nato ally with costly reprisals if Kurdish fighters are attacked in Syria

Donald Trump has vowed to destroy Turkey’s economy if its forces attack Kurdish fighters after US troops withdraw from the conflict in Syria.

With Turkey still recovering from last year’s currency crisis, The Week examines if - and how - the US president could carry out his threat against America’s Nato ally.

What did Trump say?

In a tweet posted earlier this month, Trump said his administration was beginning the “long overdue pull-out” from Syria and promised to “devastate Turkey economically if they hit the Kurds”.

In a second tweet, the president added: “Likewise, do not want the Kurds to provoke Turkey.”

His comments came amid warnings that the Kurdish People’s Protection Units (YPG), Washington’s allies in the fight against Islamic State, would be left vulnerable to attacks from the Turkish military once American troops left northern Syria.

Ankara considers the YPG and its political wing, the Kurdish Democratic Union Party (PYD), to be terrorist groups with links to the outlawed Kurdistan Workers’ Party (PKK) in Turkey.

Trump failed to offer any specifics on how the US could hurt Turkey’s economy in the event of a military attack.  

Asked whether fresh sanctions might be imposed, US Secretary of State Mike Pompeo told reporters: “You’ll have to ask the president […] We have applied economic sanctions in many places, I assume he is speaking about those kinds of things.”

How did Turkey respond?

Dismissing Trump’s tweet, Turkey’s Foreign Minister Mevlut Cavusoglu said: “You cannot get anywhere by threatening Turkey economically.

“We have said time and again - we will not be frightened, we will not be scared by any threat.”

The foreign minister also rebuked the US president for making the comments on social media. “Strategic partners don’t talk via Twitter,” he told reporters.

What are the facts?

The US has previously wreaked significant damage on the Turkish economy.

In August, Trump imposed sanctions on two senior government ministers and raised tariffs on Turkish metal exports over the detention of Andrew Brunson, a US pastor accused of supporting a failed coup against President Recep Tayyip Erdogan in 2016.

The move helped push the Turkish lira to record lows against the US dollar, triggering high inflation and a sharp slowdown in growth. The currency crisis saw Turkey’s credit rating being downgraded by international rating agencies.  

Other factors - including massive spending and borrowing by the Turkish government - contributed to the crisis, but the US sanctions and tariffs were widely considered to be the catalyst.

At the time, Bloomberg Economics rated Turkey the most vulnerable of 19 emerging-market economies.

“No other country has quite the same combination of weak and deteriorating fundamentals, as well as a government sprinting away from economic orthodoxy,” said Tom Orlik, chief economist at Bloomberg Economics.

The lira has recovered since the sanctions and tariffs were imposed, but analysts say it remains sensitive to domestic economic policy and geopolitical developments, the Financial Times reports.

Trump’s latest threat sent the Turkish currency tumbling against the US dollar, though it later recovered its value.

And experts warn that Turkey remains particularly vulnerable over its high levels of debt - most of which is in foreign currencies such as the US dollar and the euro.

As of the end of September 2018, Turkey’s external debt amounted to more than 50% of its gross domestic product (GDP), BBC Reality Check reports.

“This is Turkey’s Achilles heel,” said Gulcin Ozkan, an economist at York University. “It puts the country at the mercy of international investors and makes it vulnerable to exchange rate movements.”

Any fallout with the US could damage the financial markets’ view of the health of the Turkish economy, Ozkan added.

“This could lead to a decline in capital inflows and impact the value of the Turkish currency.”

So can Trump follow through on his threat?

Yes. The president has already proved that the US can damage the Turkish economy through sanctions and tariffs. 

Turkey’s high levels of debt leaves the country particularly vulnerable to any action taken by Washington.

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