The USD/TRY is experiencing a rise for the second session in a row, trading around 39.98 during early European hours on Monday, reaching new all-time highs. The increase is supported by a risk-off mood following US President Donald Trump’s announcement of an additional 10% tariff on BRICS nations.
President Trump stated that any country aligning with the anti-American policies of BRICS would face this tariff, with no exceptions. Further tariff concerns arise as Trump may issue 12 to 15 tariff letters later, expecting trade deals to be finalised by July 9.
Us Trade Tariff Strategy
US Treasury Secretary Scott Bessent indicated Trump’s intention to warn trading partners that tariffs might revert to April 2 levels by August 1 if no trade progress is achieved. US Commerce Secretary Howard Lutnick mentioned that Trump is finalising specific rates and agreements.
The Turkish Lira is losing value due to the Middle East conflict, with indirect ceasefire talks between Israel and Hamas ending without progress. Additionally, Turkish monetary policy has shifted, with interest rates reaching 50% in 2024 and inflation dropping to 35.05% by June 2025.
Tariffs are customs duties on imports to enhance local production competitiveness. They differ from taxes, as tariffs are paid at importation, while taxes are paid at purchase. Economists have differing opinions on their benefits or harms. President Trump’s tariff plan aims to support the US economy and target major import partners.
The latest movements in the USD/TRY pair, where it’s edging closer to 40.00, reflect more than a typical foreign exchange trend. The ongoing strength we’re seeing is not solely driven by domestic developments in Turkey. Instead, it’s being propelled by a growing list of geopolitical and trade pressures. Among these, the renewed push for tariffs from the US administration has introduced a fresh degree of tension, especially with the BRICS countries now directly targeted.
Turkish Economic Indicators
With Trump announcing a 10% blanket tariff on any nation siding with BRICS-aligned policies, and further adjustments likely before the stated July 9 deadline, the backdrop is turning increasingly complex. Derivative market participants will have noticed the currencies exposed to these trade risks reacting swiftly. The Turkish Lira, in particular, remains sensitive not only because of its own internal monetary mechanics, but also due to shifts in global sentiment caused by abrupt headline-driven risk-off pivots.
Bessent’s signal that tariff baselines could snap back to what they were in early April by August is worth following, not just in terms of timing but implied strategy. The narrative being built clearly suggests the administration is setting the stage for tough negotiations, preparing retaliatory tools should talks stall. Derivatives pricing indicators should account for the chance that volatility rises ahead of these self-imposed deadlines. It would be prudent to reflect those expectations in short-dated premium strategies.
Meanwhile, traders observing Turkish fundamentals will already be pricing in the effects of tightened monetary policy. Rates near 50% aren’t a short-term fix—they send a message of serious disinflationary commitment after years fraught with currency depreciation and uneven policy action. The recent drop in domestic inflation down to 35.05%, while sharp compared to previous readings, is unlikely to bring immediate Lira stability given external shocks are continuing to dominate price action. Markets are more attuned to what happens abroad than promises of upside surprises from domestic policymakers.
The failure of talks between conflicting parties in the Middle East further clouds the picture. With diplomatic channels appearing stagnant, risk appetite tends to lean toward safe havens. In such moments, EM currencies like the Lira usually don’t fare well, especially those with high current account gaps or dependency on foreign capital flows. Hedging strategies tied to USD/TRY, therefore, may benefit more from upward exposure patterns rather than roll-based carry setups.
Lutnick’s comments, though delivered in passing, suggest a degree of preparedness—with agreement outlines likely ready, and potential rates already under internal review. Such specifics imply that decisions may not be slow-moving. For those of us tracking swings in implied volatility, that means timing matters more now than ever over the coming two to three weeks.
As an aside, it’s worth remembering that tariffs aren’t simply about taxing products—they’re leveraged tools. Their real utility lies in behavioural influence. The American approach appears to be designed more for reshaping trade alignment than for raising revenue. That’s why blanket policies aimed at BRICS affiliations are catching attention. They create unease among secondary partners who may fear being swept into more restrictive tariff categories.
In practice, this overlapping of foreign policy messages and market instruments creates ripples more pronounced in derivatives than spot markets. The immediate outcome—USD strength and EM weakness—is the surface. For strategy positioning, we’ll need to start measuring not just volatility ranges but reaction speed to political statements. It’s increasingly becoming less about what is said, and more about how quickly markets are translating these words into price movements.
