The imprisonment of Andrew Brunson and the Trump’s additional tariffs on aluminum and steel in early August was thought to be the nadir of the ‘trade war’ that has taken place between the NATO allies. It wasn’t until Turkey’s newly re-elected President Recep Tayyip Erdogan imposed new tariffs on passenger cars, alcohol and tobacco from the US that economic disputes reached new heights.
In truth, the collapse of the Turkish economy is not unexpected. Economists, such as Amanda Sloat from the Brookings Institute, noted that the Erdogan’s unorthodox economic policy has attracted lots of investment to stimulate growth, encouraged infrastructural development, and engaged in excessive borrowing of foreign funds, particularly U.S. dollars. This has lead to an “overheated” economy which would not be a problem except for the strained US-Turkey relations and Erdogan’s refusal to raise interest rates.
Thus, Turkey’s economic crisis and the ‘trade war’ that has ensued is the result of Erdogan’s poor economic policies and a series of political disputes that have pitted the hardheaded leaders in opposition to one another. Relations began to deteriorate in 2016 with the failed coup which Erdogan blamed on Fethullah Gülen, who is currently residing in Pennsylvania. Turkey took Andrew Brunson, a North Carolina native, into custody in October of 2016 due to his alleged ties to the group that Erdogan says was behind the failed coup.
In response, the Trump administration outwardly supported the Evangelical Pastor by sanctioning two top officials of the Turkish government and issuing tariffs after Erdogan would not yield, all the while refusing to extradite Fethullah Gülen. While this is thought to be the main cause of the diplomatic dispute, other tensions have continued to sour relations. These include opposing interests in Syria and Ankara’s desire to purchase Russia’s S400 anti-missile system. Nonetheless, as the lira struggles to recover and the Turkish economy barely stays afloat, the question remains, why does this matter to U.S. foreign policy or the geopolitical spectrum at large?
First, as Ankara has struggled over the last few months, other economies have begun to falter. Argentina and South Africa face their respective economic crises as a global trend of struggling markets have emerged. We are beginning to see Trump's protectionist policies spread mistrust among international investors and the lagging recovery from the 2008 financial crisis reflected in the current state of affairs. In the aftermath of 2008, the U.S. Federal Reserve’s interests rates, as well as other central banks, hit an all time low. With time these interest rates have risen as expected; however, countries that have yet to recover or fully develop are caught with increasingly expensive debts. Many developing countries with high levels of external debt are left in a precarious position as global trade begins to suffer due to protectionist policies and declining U.S.-China trade relations. If the teetering global markets weren’t enough, then surely the escalating crisis in Idlib, Syria and pursuit of peace in the Middle East should incentivize Trump and Erdogan to set aside their petty differences.
U.S.-Turkey relations are of critical importance to NATO and stability in the Middle East. It is crucial to U.S. interests that Turkey remain in the NATO as Turkey will prove to be a far more difficult ally outside of NATO. Furthermore, Turkey will remain an important actor with regards to key U.S. political interests such as Syria, migration, and counterterrorism efforts. Therefore, Trump may have the upper hand in the so-called trade war that ensues, but for the sake of U.S. foreign policy, bringing Ankara to its knees economically will likely strain future diplomacy.