Trade War Watch: Turkey Readies 120 Percent Tariff On American Cars

In Joseph Conrad’s Heart of Darkness, Kurtz has an epiphany regarding himself, imperial conquest, and war as a whole, crying “The horror! The horror!” in his last moments of life. His experiences took him from a well-meaning businessman to a megalomaniacal warlord, only able to realize the full scope of his own corruption upon his death. Trade wars contain significantly less drama than real ones, but there is never a shortage of egotistical individuals falling down a rabbit hole of madness.

This week, a decree signed by Turkish President Recep Tayyip Erdogan raised the tariff on U.S. cars to 120 percent. While this doesn’t qualify as truly horrific, it certainly could head in that direction if things continue to escalate.

Erdogan’s decision came after the United States imposed new sanctions in response to human rights abuses. Turkey imprisoned over 50,000 individuals, including 20 Americans, following a failed coup d’état in 2016. The White House claims American citizens have been wrongfully imprisoned and is likewise displeased that the nation chose to purchase a missile defense system from Russia.

Long story short, Erdogan told the U.S. to kick rocks. The Turkish leader remains incredibly vocal about how little he seems to like Western leaders making moral judgements about Turkey — which has seen the incumbent party jailing political opponents, undertaking election fraud, and the possibility of endorsing religious violence. The response? Economic sanctions. President Trump announced plans to further hike tariffs on Turkish steel and aluminum, which led to Turkey affixing huge tariffs to American alcohol, tobacco, and cars.

Turkish Vice President Fuat Oktay said on Twitter that the measures were in response to “the deliberate attack of the U.S. administration on our economy.”

Turkey has a sizable automotive industry for a European nation, exporting over $25 billion in vehicles (a lot of them buses) and parts every year. It also has facilities owned by Toyota, Honda, Fiat, Renault, Hyundai, and Ford that export globally. Production output is booming, with the country’s automotive associations predicting $30 billion in car-related exports by the end of 2018. But only a sliver of that will come from North America.

While the direct exchange of of passenger vehicles between the two nations is minimal, Turkey does (or did) export the Ford Transit Connect to the United States. Assuming the U.S. plays this out and imposes car tariffs of its own, those vehicles may have to be sourced entirely from Spain. The future of the Toyota C-HR could also get a little dicey, since the manufacturer currently ships North American-spec models in from the country. That is, of course, only if the U.S. imposes retaliatory auto tariffs.

However, the real risk involves future investments. Turkey wants companies throwing money at it to further bolster its automotive industry, which has been the case lately. While it’s currently the 5th largest automotive manufacturer in Europe, it’s swiftly climbing the ladder. Trade issues could cause investors to shy away from it in the future, especially if European nations follow the U.S. by imposing economic sanctions of their own.

[Source: Bloomberg] [Image: Hyundai Assan Otomotiv]