President Donald Trump said on Friday he had authorized higher tariffs on imports from Turkey, imposing a 20 percent duty on aluminum and 50 percent one on steel, as tensions mount between the two North Atlantic Treaty Organisation allies over Ankara's detention of an evangelical pastor and other diplomatic issues.
The day saw the lira plunge as much as 18% at one point, the biggest one-day drop since Turkey's 2001 financial crisis.
Investors have become increasingly concerned with the faltering Turkish economy, its central bank's willingness to respond to the downturn and the impact it could have on global financial markets, according to multiple reports.
"At the same time, the new US sanctions against Russian Federation have unleashed concern in the German economy", he added.
The lira has now lost over a third of its value against both the dollar and the euro this year, with the currency battered by both concerns over domestic economic policy and the political situation.
Trump decided in March to impose import duties of 25 percent on steel and 10 percent on aluminum imports from several countries, including Turkey. Trump wrote on Twitter. "Our relations with Turkey are not good at this time!".
"The reason local denominated bonds have been hurt is the potential trade war initiated by the Trump tariffs", explains Maizel, "Most emerging countries live and die from commodities and the fear of lower markets hurts them". Financial upheaval there risks further destabilizing an already volatile region.
But while Mr Erdogan - who vowed Turkey would win the "economic war" - favours lowering borrowing costs to fuel credit growth and economic expansion, others would rather see interest rates rise.
The article, written by Eric Levitz, said the decision was related to Brunson, and while imposing a high tariff on a country's steel exports is not the most conventional way to secure his release, "it might prove an effective one". "Failure to reverse this trend of unilateralism and disrespect will require us to start looking for new friends and allies", Erdogan said.
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"My guess is you're going to get people cutting estimates, if we get bad volatility here on the capital markets front", said Charles Peabody, a bank analyst at Portales Partners.
Following the tweet, Turkey responded by imposing duties on $1.8 billion in USA goods including coal and paper.
The lira fell as much as 18 per cent against the US dollar in its worst day since Turkey's financial crisis of 2001.
Ankara wants the United States to extradite Fethullah Gulen, a Pennsylvania-based cleric who Turkish authorities say masterminded the 2016 coup attempt in which 250 people were killed. Gulen has denied the allegation.
The lira's slide came after a US delegation from Washington, D.C., left Turkey without making progress toward the release of Andrew Brunson, an American pastor detained by Erdoğan's government since 2016.
Here, the Americans might have moved too soon, not realising that in Turkey, house arrest would nearly certainly lead to dropping charges. Two days later, Secretary of State Mike Pompeo warned that Turkey that the "clock had run out" to release Brunson.
Erdogan enjoys the support of many Turks even though food, rent and fuel prices have all surged.