The Turkish lira hit an all-time low of 6.49 on Friday after a meeting the day before between a Turkish delegation and US officials in Washington yielded no apparent solution to a diplomatic rift over the detention in Turkey of a USA pastor.
On Friday, US President Donald Trump announced to double steel and aluminum tariffs on Turkey, saying relations between Washington and Ankara "not good" as tensions mount between the two countries. "You are exchanging your strategic partner in North Atlantic Treaty Organisation for a priest". The White House said the newly imposed sanctions would take effect from August 13.
And he brushed off the tariffs.
On Thursday, Erdogan said "If they have their dollar, we have the people, we have Allah". "Don't give. What we have is enough for us". As long as it does not respect Turkey's sovereignty, the bilateral relationship will be in danger.
Erdogan signaled he was not looking to offer concessions to the United States, or financial markets.
Without naming any country, Erdogan said that those - who stand against Turkey for the sake of small calculations - would pay the price.
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In an opinion piece in the New York Times, he warned the U.S. that Ankara had other alternatives as allies.
Iran's Foreign Minister Mohammad Javad Zarif waded into the mounting row, accusing Washington of an "addiction to sanctions and bullying".
According to Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics, "The administration seems to be willing to accept a scenario in which Turkey - as the economic crisis escalates and the nationalist rhetoric we've heard come out of Erdogan escalates - that Turkey is no longer a strategic ally".
"The US has to rehabilitate its addiction to sanctions (and) bullying or entire world will unite - beyond verbal condemnations - to force it to".
"Those who can't compete with us on the ground have brought online fictional currency plots that have nothing to with the realities of our country, production and real economy", he stated.
Iran has also suffered a major tumbling of its currency this year partly over the reimposition of U.S. sanctions after Trump abandoned the 2015 nuclear deal.
Mr. Erdogan, who has called himself the "enemy of interest rates", wants cheap credit from banks to fuel growth, but investors fear the economy is overheating and could be set for a hard landing. "We will only do what justice demands", Efe quoted Erdogan as saying during a rally in the northern province of Ordu.