Inflation data was released yesterday. Now, let’s take a quick look at the markets.
Stock market remains flat while Currency Basket and Benchmark Rate are slowly going up, which shows that markets have not been too affected by inflation rate, which turned out to be slightly higher than expected. Maybe the most important reason for that is the fact that Turkish Central Bank is not expected to change its policies based on the recent inflation data.
Most experts as well as International Institutions do not expect CBRT to take an action until the next Fed Meeting. Neither do i. So, there won’t be any (at least) “official” changes in the cost of funding. But obviously, market rates are quite different from official rates.
Trump’s statements regarding his administration will impose tariffs on some imports caused US’s trade partners to engage in “counter-attack” preparations. US is ranked first in European cars import throughout the world and the second-best is Turkey. No, that’s not a joke. Even the number of European cars sold in China is not as high as it is in these two countries.
“Will imposing tariffs on imports work?”
Will European brand cars will be sold less when Trump administration will apply tax on them? Maybe for a while… But then everything will go back to normal in time. For example: Turkish car market is still going strong despite ever-increasing taxes.
By the way, I must admit that there’s a difference between the US and Turkey: Americans have powerful car brands while Turks do not.
American citizens, however, buy American brand cars that are made in foreign countries. Because it’s cheaper to produce abroad than USA. Trump thinks he can encourage foreign manufacturers to produce in the United States by hiking taxes. And the fact that some brands have recently started to say, “We are coming to invest in America” in order to calm the US President down unfortunately encourages Trump to continue with his comical statements.
The same goes for Turkey. Some think that they can attract foreign investment through additional tariffs. However, production costs and logistics infrastructure in Turkey are not strong enough to carry out such operations. A number of foreign brands are trying to prevent Ankara from taking radical steps by declaring that they are coming to invest in Turkey. But they are making a mistake just like those declaring that they will invest in the US.
The truth is encouraging the Government to take radical steps does not help boost investments; on the contrary, it causes both high and higher cost of living to rise further. Although Government makes enthusiastic statements like “Exports are on the rise”, no one says anything about imports rising at fast pace.
And as any impact analysis for Government policies is not conducted, Government keeps saying, “Imports is still rising. So, we should impose more taxes”. Vicious circle, defines elegantly the situation.