Are Trump's tariffs that upend the global trade order an opportunity for Turkey?

Business representatives and economists in Turkey have begun to see a glimmer of hope behind the storm clouds of economic turmoil. According to the U.S. Office of the Trade Representative, Turkey's exports to the U.S. in 2024 are projected to be $16.7 billion. Turkey is also importing goods and services from the U.S. at similar levels.

In a trade announcement made last week by U.S. President Donald Trump, a minimum customs duty of 10% was applied to Turkey, while higher tariffs were imposed on many other countries, raising expectations that Turkey, as the world's 17th largest economy, could benefit from customs duty tariffs. Finance Minister Mehmet Şimşek stated on Monday that focusing on domestic demand rather than exports would also mean a more limited impact on the economy. Şimşek added, "Turkey has free trade agreements with a total of 54 countries outside the U.S. and the EU," noting that "68% of our exports go to these countries." Turkey has a customs union with the European Union that removes trade restrictions. Speaking on Friday, a day after Trump’s announcement, Şimşek said Turkey's "relatively low tariff rate could provide a comparative advantage in some sectors." Can Selçuki, managing partner of Istanbul Economic Research, emphasized that the main adverse effect on Turkey would come through intermediate goods supplied to countries or entities subject to higher rates, like the EU, which exports to the U.S. and faces a 20% customs duty. According to the U.S. Office of the Trade Representative, Turkey's exports to the U.S. in 2024 are projected at $16.7 billion (634.7 billion TL). Turkey is also importing goods and services from the U.S. at similar levels. This level falls short compared to the exports to the EU, which President Recep Tayyip Erdoğan stated reached $108.7 billion (4.1 trillion TL) last year in January. Selçuki commented, "Any loss in the competitiveness of EU products inevitably affects Turkey as well, because Turkey exports intermediate goods to provide inputs for final EU products. This is the most obvious adverse aspect." However, Turkey may be able to leverage the new global trade environment to its advantage. Selçuki assessed, "Many manufacturing productions will need to relocate, and Trump's picture is prompting everyone to rethink their supply chains. With a strong manufacturing base and proximity to the EU, Turkey is in a unique position to benefit from this reorganization." Şekib Avdagiç, president of the Istanbul Chamber of Commerce, suggested that companies based in countries with high customs duty rates, like China, may want to open factories in Turkey to export to the U.S. at a lower rate. Gürkan Yıldırım, president of the Turkish Young Businessmen Association, told Anadolu Agency (AA), "Turkey's ability to use this opportunity will depend on its strategy to develop export sectors and find new markets. If Turkey offers a suitable investment environment, it can attract these companies' investments." Selva Bahar Baziki, an economist at Bloomberg Economics in Ankara, noted that even when considering indirect trade through third countries, Turkey's gross domestic product (GDP) is exposed to less than 2% of U.S. demand. The sectors most at risk are expected to be those exporting metals and textiles. Referring to the fluctuations in the Turkish lira in recent years and their impact on high inflation, Selva Bahar Baziki added that customs duties would not create "inflationary pressure arising from exchange rate movements dependent on trade policies."