US-Turkey Diplomatic Tensions

Both the US and Turkey have announced they have suspended all non-immigrant visa services for travel between the two nations. The shock announcement came after a United States consulate worker in Istanbul was held over  suspected links to the cleric blamed for last year’s failed coup. The statement by the US mission said, “Recent events have forced the United States government to reassess the commitment of government of Turkey to the security of US mission and personnel”. The announcement also had its impact on financial markets, with the Turkish Lira weakening against the US Dollar.

US – Turkey Relationship

The US-Turkey relationship has been good in recent years but the latest developments may leave a bad taste between the two nations going forward. Only last month, President Trump met with the Turkish leader Recep Tayyip Erdogan at the 72nd United Nations General Assembly, which indicated that the relationship was as good as it had ever been, with Trump even praising the Turkish President; “Frankly he’s getting very high marks”, “I think we’re right now as close as we’ve ever been”, Trump added. Both nations partner closely on many regional and international issues, including the wars in Iraq, Afghanistan and the Balkans. Turkey is also an important ally in the fight against the Islamic State.

Trade has decreased in recent years after US-Turkish trade peaked to its highest level in 2011 (around $20 billion). Last year, trade volume between Turkey and the United States was $17.52 billion. Turkey’s total export to the United States was around $6.62 billion, while imports were around $10.9 billion. Turkey is expected to be worlds 12th most powerful economy by 2030, according to PwC.

Other facts

There are around 300,000 Turkish Americans as of January 2017

Turkish Airlines has direct flights to 9 destinations in the United States

Turkey hosted nearly 460,000 American tourists in 2016

There are over 1,400 American companies operating in Turkey across most sectors, with over 60 US companies that have regional headquarters in Turkey

Turkey is the 17th largest economy in the World

Source: Republic of Turkey Ministry of Foreign Affairs

Financial Markets

After the news about the decision broke, the US Dollar strengthened against the Turkish Lira to its highest level since March 2017. It was up by around 3% as of 4:30 PM London time. Further developments on the issue could have more effect on the financial markets and both parties will want to resolve the issue as soon as possible.

USD/TRY

By: Klavs Valters
GO Markets