USD/TRY rises to near 40.00, marks fresh highs due to risk-off sentiment
- USD/TRY gains ground amid renewed tariff concerns following the Trump’s warning to BRICS allies.
- President Trump threatened to impose an additional 10% tariff on BRICS nations, accusing the group of pursuing anti-American policies.
- The risk-sensitive Turkish Lira weakens amid escalating tensions in the Middle East.
USD/TRY extends its gains for the second consecutive session, trading around 39.98, marking fresh all-time highs, during early European hours on Monday. The pair appreciates as the US Dollar (USD) receives support from risk-off mood, driven by the US President Donald Trump’s warning of extra 10% tariff on BRICS nations.
President Trump posted on social media on Monday “Any Country aligning themselves with the Anti-American policies of BRICS, will be charged an ADDITIONAL 10% Tariff. There will be no exceptions to this policy.” Additionally, the risk sentiment weakens due to renewed tariff concerns as Trump may send out 12 or 15 letters on tariffs later in the day, with the expectation that trade deals or letters with most nations will be done by July 9.
US Treasury Secretary Scott Bessent said on Sunday that US President Donald Trump will send letters to some trading partners, warning that tariffs could revert to April 2 levels on August 1 if no progress is made on a trade deal. US Commerce Secretary Howard Lutnick noted that Trump is currently finalizing the specific rates and agreements and may send out 12 or 15 letters on tariffs on Monday.
Additionally, the risk-sensitive Turkish Lira (TRY) loses ground due to ongoing conflict in the Middle East. The indirect ceasefire talks in Qatar between Israel and Hamas have concluded without a breakthrough, per BBC report. Israeli killed at least 39 people in Gaza City on Sunday, a day after killing at least 78 Palestinians in attacks across the besieged Strip.
The Central Bank of the Republic of Türkiye has implemented more orthodox monetary policies to curb inflation and rebuild investor confidence. In March 2024, the central bank raised interest rates to 50% and held them steady until December, when it began easing. The policy rate currently stands at 46%. Meanwhile, inflation dropped to 35.05% in June 2025 — its lowest level since November 2021.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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