The U.S. dollar index surged against most other major currencies in late trading on Friday, as U.S. President Donald Trump authorized doubling of the tariffs on steel and aluminum products from Turkey to 50 percent and 20 percent respectively.
In March, the U.S. had imposed tariffs of 25 per cent on steel and 10 per cent on aluminum for imports from a variety of countries. "Our relations with Turkey are not good at this time!" the President tweeted on Friday.
The moves stem from Trump's frustration over a detained American pastor held by Turkey on what United States officials say are bogus charges, two sources with knowledge of the President's mind-set tell CNN.
Trump's decision to double tariffs on Turkey is another salvo in the growing dispute between the two North Atlantic Treaty Organisation allies.
The president, who says a shadowy "interest rate lobby" and Western credit ratings agencies are attempting to bring down Turkey's economy, appealed to Turks' patriotism.
Erdogan said his decision to sanction the U.S.in retaliation for American sanctions was to convey that Turkey "does not respond to threats".
"Nevertheless, we implore President Trump to return to the negotiating table - this can and should be resolved through dialogue and cooperation".
Alan Madison, a spokesman for Borusan Mannesmann's US subsidiary, said the company and its Turkish parent were still studying Trump's new proposal and declined to comment further.
Countries like Turkey that are experiencing economic turmoil usually get sympathy from the rest of the world, said Torsten Sløk, chief worldwide economist for Deutsche Bank.
"Turkey expects other member countries to abide by worldwide rules", the ministry said in a statement, adding that it would support steel and aluminum exporters on all global platforms.
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Kinder Morgan Inc, the second largest North American pipeline operator, had already ordered almost half of the specialized pipe needed for its Gulf Coast Express project from Turkish steel maker Borusan Mannesmann before the original tariff went into effect, spokeswoman Sara Hughes said.
The lira fell further as Erdogan spoke. "Failure to reverse this trend of unilateralism and disrespect will require us to start looking for new friends and allies", President Erdogan said.
Turkey exported about 500,000 tons to the U.S.in the five months to May, compared with more than 1 million tons in the same period previous year, according to data from the U.S. Census bureau.
Meanwhile, concerns of the US-Turkey spat went beyond Turkey's borders as Financial Times reported that the European Central Bank (ECB) has become concerned about the exposure of some of the currency area's biggest lenders to Turkey in light of Turkish lira's dramatic fall.
Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency. "This is a domestic and national struggle".
After winning a June election with revamped powers, he tightened his control over the central bank and appointed his son-in-law Berat Albayrak to head a newly-empowered finance ministry.
"One of our principles will be ensuring the full independence of monetary policy", Abayrak said as he outlined his ministry's "new economic model".
"This will be my people's answer to those who declare economic war against us", he added.
Investors fear that banks in Asia and Europe could suffer because they have invested in Turkish assets like stocks, bonds or the currency itself. Turkey is the sixth-largest steel exporter to the United States. "Don't heed them. Don't forget, if they have their dollars, we have our people, our God", Erdogan said.