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Turkish President Recep Tayyip Erdogan on Tuesday vowed to boycott iPhones in a demonstration of defiance as the U.S. held firm to its demand that Turkey release an American pastor. Turkish executives, meanwhile, called for action to bolster the nation's sinking currency.

Turkey later took a more concrete step against the U.S., announcing today that it plans to impose extra tariffs on imports of products including rice, vehicles, alcohol, coal and cosmetics.

Vice President Fuat Oktay said on Twitter that the tariffs on certain products were increased "within the framework of the principle of reciprocity in retaliation for the conscious economic attacks by the United States."

In remarks Tuesday, Erdogan said the nation of 80 million people would stop buying American electronics, arguing that the U.S. has mounted an "explicit economic attack" against Turkey. The lira lost a quarter of its value this month as President Donald Trump doubled tariffs on Turkish steel and aluminum imports and imposed sanctions on two ministers in the dispute between the two countries.

The lira rebounded Tuesday as Turks sold dollars.

"There is a cost for those who are plotting the operation" against Turkey, Erdogan said in a Tuesday speech in Ankara, without specifying when a boycott would start or how it would be enforced. Singling out the iPhone, he suggested that Turks buy Samsung Electronics or locally made Vestel Venus smartphones instead.

The comments by the Turkish leader were particularly notable given that he and several of his top ministers are frequently seen with iPhones. In mid-2016, as he fended off an attempted coup, Erdogan used FaceTime to call for his supporters to take to the streets.

While even a widespread Turkish boycott would do little to dent U.S. economic interests, Erdogan's comments reflect his refusal to give in to market turmoil that has pushed borrowing costs to record highs and threatens to push the nation into a financial crisis.

Erdogan's boycott call is reminiscent of the decision by Russian President Vladimir Putin to ban food imports from countries that slapped sanctions on his country in 2014 after its annexation of Crimea. The difference is that unlike Russia, the U.S. and Turkey are NATO members. Erdogan warned that the U.S. is putting decades-old alliances at risk and pushing Turkey to seek allies elsewhere.

While diplomatic tensions rage, the currency rallied for the first time in a week as Turks cashed in dollar savings to take advantage of the slump in the local currency. Speculation is also growing that Turkish policymakers will heed calls from corporate and banking executives to raise interest rates to stem the rout. The lira jumped 5.9 percent to 6.5028 per dollar by Tuesday evening in Istanbul.

Bonds also recovered, with the yield on 10-year notes falling 132 basis points to 21.37 percent. The cost of insuring the nation's debt against default fell from 10-year highs.

Finance Minister Berat Albayrak, attending a conference in Ankara alongside Erdogan, said the dollar is no longer a "trustworthy" currency and is instead being used as a tool for political punishment.

"We're going to continue to take steps to protect the lira. We will make all kinds of preparations, from A to Z," Albayrak said. He did not elaborate.

The Russian foreign minister said Tuesday that the U.S.' increased use of sanctions will erode the dollar's role as the top reserve currency.

Sergey Lavrov, speaking after talks Tuesday with his Turkish counterpart, Mevlut Cavusoglu, said the wide use of sanctions reflects U.S.' desire to dominate and secure unilateral advantages for its businesses.

Lavrov said the U.S. policies will undermine the dollar's position as the international reserve currency of choice. He said Russia and Turkey have set goals to switch to national currencies in mutual trade.

Independent economists say it would be difficult to unseat the dollar as the top reserve currency because it is used widely in the global economy, including for trade in oil and for commercial deals.

Tensions between the U.S. and Turkey have intensified in the dispute over the detention of Andrew Brunson, whom Turkey accuses of aiding the failed coup attempt. Trump's top national security aide warned Turkey's ambassador on Monday that the U.S. has nothing further to negotiate until Brunson is freed, according to two people familiar with the matter.

The Union of Chambers and Commodity Exchanges of Turkey and the Turkish Industry and Business Association said in a joint statement that policymakers need to adopt a series of measures "so that the situation doesn't make permanent damage to the real economy."

They called on the government to cut spending, improve ties with the European Union, bring to an end the standoff with the U.S. and chart out a clear plan to bring inflation -- which soared to a 15-year high of almost 16 percent in July -- back to single digits permanently.

A similar plea came from the nation's banks, including the second-largest by assets, Turkiye Garanti Bankasi AS. While Turkey's central bank has raised lending rates by 500 basis points this year to 17.75 percent, it hasn't acted since the latest turmoil began Aug. 1 with U.S. sanctions on the interior and justice ministers.

"Something has to be done about interest rates," Ali Fuat Erbil, Turkiye Garanti's chief executive officer, said in an interview aired by Turkey's NTV news channel. "Besides fiscal discipline, monetary tightening is the remedy. Is there need for that? Yes there is."

While Erdogan didn't address their concerns in speeches Tuesday, he suggested that Turks have already begun responding to his call to convert foreign currency into lira because it would be tantamount to "surrendering" if they did otherwise.

Citizens tend to have bank accounts in various currencies, so how they move their money does have a meaningful effect on the lira's trajectory.

Information for this article was contributed by Onur Ant, Asli Kandemir and Constantine Courcoulas of Bloomberg News; by Prashant S. Rao of The New York Times; and by staff members of The Associated Press.

A Section on 08/15/2018

Print Headline: Turk vows to boycott electronics from U.S.

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