The USD/TRY is on the rise for the second consecutive session, trading around 39.98 during early European hours on Monday, hitting new all-time highs. This increase comes amid a risk-off mood following US President Donald Trump’s announcement of a 10% tariff on BRICS nations. President Trump declared that countries supporting BRICS’ anti-American policies would be subject to this tariff, with no exceptions. Concerns about additional tariffs are growing, as Trump is expected to send out 12 to 15 tariff letters soon, aiming to finalize trade deals by July 9.

US Trade Tariff Strategy

US Treasury Secretary Scott Bessent revealed that Trump plans to inform trading partners tariffs might revert to April 2 levels by August 1 if no trade progress is made. US Commerce Secretary Howard Lutnick noted that Trump is finalizing specific rates and agreements. The Turkish Lira is depreciating, partly due to the ongoing conflict in the Middle East. Ceasefire talks between Israel and Hamas ended without results. Turkish monetary policy is also changing, with interest rates projected to rise to 50% in 2024 and inflation expected to fall to 35.05% by June 2025. Tariffs are customs duties on imports designed to boost local production competitiveness. They are different from regular taxes, which are paid at the point of sale. Economists have varying opinions on their overall benefit or harm. Trump’s tariff plan intends to bolster the US economy and target major import partners. The recent rise in the USD/TRY reflects more than just a standard foreign exchange trend. The continued strength is influenced by various geopolitical and trade pressures, including the US administration’s renewed focus on tariffs aimed at BRICS countries.

Turkish Economic Indicators

With Trump’s blanket 10% tariff targeting nations aligned with BRICS policies and potential adjustments expected before the July 9 deadline, the situation is becoming increasingly complicated. Traders in the derivative markets are reacting quickly to these trade risks. The Turkish Lira is particularly vulnerable due to its internal monetary issues and global sentiment shifts driven by urgent risk-off pivots. Bessent’s warning about tariffs potentially returning to early April levels by August is significant, not just for timing but for its strategic implications. The administration seems to be preparing for tough negotiations, equipping itself with tools for retaliation if talks stall. Volatility may rise as these deadlines approach, making it wise to consider this in short-term strategies. Meanwhile, traders analyzing Turkish fundamentals are already factoring in the impact of tighter monetary policies. Interest rates near 50% are not a quick solution; they signal a long-term commitment to reducing inflation after years of currency depreciation and inconsistent policies. Although domestic inflation has dropped to 35.05%, which is an improvement, external pressures are likely to continue affecting the Lira’s stability. The unsuccessful Middle East talks further complicate matters. Diplomatic stagnation usually leads to a preference for safe-haven currencies, making emerging market currencies like the Lira more vulnerable, especially those with significant current account deficits or reliance on foreign investment. Therefore, hedging strategies related to USD/TRY should focus on upward exposure rather than carry setups. Lutnick’s remarks, although brief, indicate readiness. Agreement outlines may be prepared, and potential rates under consideration suggest swift decision-making. For those tracking implied volatility, timing will be crucial in the coming weeks. It’s important to remember that tariffs serve as strategic tools, not just revenue generators. The US approach seems more aimed at reshaping trade relationships than collecting taxes. That’s why tariffs on BRICS affiliations draw attention, creating uncertainty among secondary partners who fear becoming subjects of stricter tariffs. The interaction between foreign policy messages and market reactions typically affects derivatives more than spot markets. The immediate results show USD strength and EM weakness. For positioning strategies, we need to measure not just volatility ranges but also how quickly markets respond to political statements. It’s becoming less about the content and more about the speed at which markets react to these developments. Create your live VT Markets account and start trading now.

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