President Trump’s victory has been enthusiastically welcomed by Türkiye, with Erdoğan being one of the first world leaders to congratulate him. It is also evident that Erdoğan and Trump shared closer personal ties during Trump’s first term in office than Erdoğan did with President Joe Biden.
The Turkish economy underwent drastic volatility during Trump’s presidency, especially in his first term, with the additional US sanctions in 2018. Such sanctions that were placed following Ankara’s procurement of Russian missile systems and the arrest of an American pastor were directed at Turkish individuals and caused the Turkish lira to depreciate. On August 10, 2018, Trump threatened to impose even deeper metal tariffs on Turkish steel and aluminum, doubling the already existing ones, which was followed by the sharp devaluation of the lira by 40% that year. This shock revealed that Türkiye was rather sensitive to external economic shocks.
The lira had already been under pressure due to Erdoğan’s unorthodox approach to managing the Turkish economy. High and rising USD value added to the list of Türkiye’s external debt of more than $220 billion, with 80% of this debt in USD. Hiking the interest rates, a part of Trump’s economic policy created favorable conditions for foreign investors to invest their funds in the American markets, threatening the little investment that remained in the emerging ones, such as the Turkish markets.
A 10% appreciation in the dollar is capable of cutting economic growth in emerging markets by 1.9% within the first six months. This is in line with Türkiye’s experience: Because of the devaluation of its currency, the value of the lira went up, especially in the cost of importing commodities, which led to worsened trade imbalances and inflation.
Trump’s policies and those of his administration not only influenced the economic direction of Türkiye but also strained the bilateral relations between Türkiye and the U.S. The fractious nature of the bilateral relationship became most pronounced thanks to the conflict over the Turkish purchase of the Russian S-400 missile system and American support for Kurdish forces in Syria. Given this, tensions boiled down to the economic sanctions, which Erdoğan attributed to the “economic war” against Türkiye.
Still, many of these measures and the president’s appeals to the citizens to exchange foreign currency for lira did not help. The failure of the central bank to hike interest rates whenever Erdoğan pressured them to deepen investors’ woes.
When Trump came into power, the dollar gained ground again, and it impacted the social-economic fabric of Türkiye in many ways. Inflation also fueled in Türkiye due to the rise in the price of goods through costlier dollars, and it deepened the inequality in Türkiye as necessities became more expensive. On the other hand, Türkiye stabilized questionable financial structures while its citizens were fleeing to other countries in search of asylum. The number of people seeking asylum surpassed 32,000 between 2021 and 2023, putting Türkiye firmly on the refugee list and revealing new internal weaknesses that the economic insecurity had deepened.
Regarding immigration policy in the second term of Trump, it can potentially be adverse for Türkiye. Mass deportations and reduced remittances would not just impact Turkish migrants in the US but also the steady stream of hard currency inflows into the families in Türkiye.
Even though Trump’s administration demonstrated that Türkiye and the US share some friendship through Erdoğan and Trump, their countries were opposites in main geopolitics. The Türkiye-Russia agreement and Türkiye’s disrespect of the US sanctions reflected the meaning of Erdoğan’s wish to build up Türkiye’s free will. But these steps further isolate Türkiye within NATO and expose it to US economic policy fluctuations.
As the effects of the return of Trumponomics are anticipated globally, they were not the root cause of Türkiye’s economic collapse. Turkish President Erdoğan has often relied on a crowd-pleasing narrative, blaming external challenges as part of an international conspiracy led by the US while failing to adequately address the deep-rooted structural issues within Türkiye’s economy. Nevertheless, Trumponomics has served Türkiye with important lessons in the global economy regarding the consequences of overdependence on foreign investment and the necessity of economic diversification.
And while Trump contemplates another presidential term, Türkiye is presented with new questions. To its disadvantage, its future may again be marred by a revived stronger dollar and/or reinstitution of the sanctioned money. To overcome these challenges, Türkiye will require broad-ranging reforms that address the need for sustainable development that is capable of withstanding external shocks.
Trump’s policies have brought out their fundamental linkage to the globalization process and the highly sensitive emerging economies, such as Türkiye. Even though there are attempts made by Erdoğan’s government to navigate through these elements, the outlines of Trumponomics define the course of relations with the US and the economic destiny of Türkiye.
Edited by: Oya Yamaç