Turkish Finance Minister identifies opportunity amid tariff turmoil

Turkish Finance Minister Mehmet Şimşek said on Tuesday that the market uncertainty caused by US President Donald Trump’s tariffs will potentially help Türkiye outperform some of the other global markets. Trump, who has good relations with Türkiye’s President Recep Tayyip Erdoğan, placed the baseline 10% tariff on Turkish exports to the United States.

Şimşek stated that the collapse in global markets caused by Trump’s tariffs would be less reflected in Türkiye than in other countries. On Saturday, Türkiye’s Vice President Cevdet Yilmaz said that the new US customs tariffs announced by President Trump presented an economic advantage for Türkiye as the country had been placed in the lowest tariff bracket among global trading partners.

The Turkish Finance Minister claimed that slowing global growth and tight domestic money policies were also “disinflationary,” which would help get Turkish inflation down—a central aim of his stabilization program. Şimşek also said that all of this was relatively constructive, and he believes that Türkiye could “positively decouple in investors’ eyes” from more troubled emerging economies in Asia and elsewhere.

Şimşek sees opportunity for Türkiye amid Trump’s tariff commotion

Şimşek said Türkiye’s relatively low tariff rate provided a comparative advantage in some sectors. He added that Türkiye had a chance to outperform other emerging markets hit by Donald Trump’s tariffs once the dust settled, thanks to manageable US trade exposure and lower oil prices. Şimşek also argued that Türkiye’s $1.3 trillion economy was relatively insulated as 80% of its trade was with countries with which it had a free trade agreement, such as its customs union with the EU or with “friendly neighbors” in the Middle East, Central Asia, and North Africa. 

According to data compiled by the US government, Türkiye’s bilateral trade with the US totaled $32 billion last year, about 5% of the country’s overall trade in goods, with a $1.5 billion surplus in Türkiye’s favor. However, Şimşek’s economic program faced its harshest test yet last month following the arrest of Istanbul mayor Ekrem İmamoğlu, the country’s star opposition politician and biggest rival to Erdoğan, sending Turkish financial markets plummeting.

“There was a large but brief impact from domestic political-driven turbulence. Now the turbulence is tariff-driven…In relative terms, our vulnerability is not so bad. We may have to live with softer growth. But what is, is: you have to live with external shocks such as these U.S. tariffs.”

–Mehmet Şimşek

Tim Ash, a long-time Türkiye watcher and sovereign strategist at RBC Bluebay Asset Management, stated recently that the Turkish market should provide an anchor against political instability as long as Şimşek stayed. However, Şimşek conceded that a slowing Turkish economy would mean lower tax revenues, and this could lead to a wider budget deficit than forecasted. The budget deficit was predicted to fall to 3.1% of GDP this year, down from 4.9% in 2024.

Other Turkish officials say Trump’s tariffs give Türkiye an economic edge

Turkish Vice President Cevdet Yilmaz claimed on Saturday that Trump’s tariffs gave Türkiye an economic edge as the country was in the lowest tariff bracket. Yilmaz said Trump’s move to apply high tariffs on countries like China and members of the European Union altered the trade environment in a way that benefited Türkiye. Trade Minister Ömer Bolat also said on Friday that Türkiye will “beef up” trade efforts with the US and push for the removal of new tariffs imposed by Washington.

Şekib Avdagiç, president of the Istanbul Chamber of Commerce, suggested that companies based in countries with higher tariff rates, such as China, may seek to open factories in Türkiye to export to the US at a lower rate.

However, Yilmaz also warned of indirect risks, saying that the rising tariffs may lead other countries excluded from the US market to enter other global markets more aggressively, meaning that Türkiye would have to be mindful of the competitive pressures and search for new markets.

Can Selçuki, managing partner of Istanbul Economics Research, said the main negative effect on Türkiye would likely be through intermediate goods it supplied to countries or entities that exported to the US, which were subject to higher rates, such as the EU, which was subject to a 20% tariff. 

Yilmaz disclosed that Türkiye’s $100 billion trade target with the US remained in focus and that President Recep Tayyip Erdoğan and President Trump were expected to address all bilateral matters in upcoming talks. Yilmaz also noted that Türkiye had been invited to participate in the “Peace and Security for Ukraine” summit in Paris, a sign of renewed cooperation between Türkiye and Europe.

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