In the Turkish economy, we are observing a trend where the growth rate, which fell below 3 percent in 2024 due to the impact of tight monetary policy, is expected to rise above 4 percent again starting from the second quarter of this year.
Erhan ASLANOĞLU
Istanbul Bilgi University
Faculty Member, Department of Economics
The year 2025 continues to be a year marked by extremely significant economic and geopolitical developments in the global economy. Trade wars, reignited with the start of Trump's second term, entered a cooling-off period after peaking in April. In early August, we observed Trump lowering customs duties with a commitment from his main trade partners to make high-volume investments in the US. In early August, we encountered a scenario where the US customs duty rate, which was about 3 percent at the beginning of the year, rose to 18 percent, lower than April but the highest since World War II. During this process, negotiations with China were inconclusive, and the 30 percent customs duties remained fixed until the end of the talks.
In October, following China's move to restrict rare earth exports, a new phase in the escalating trade war began with Trump's threat to impose an additional 100 percent new tax on top of the existing 30 percent tax on China. Our prediction is that if these high customs duties and retaliations come into effect, the consequences could be very detrimental for both the US and Chinese economies, as well as the global economy. We estimate that neither the US nor China can afford to take such a risk in the current situation, and we expect an agreement will be reached, at least for now, on customs duties at more reasonable levels, even if they remain relatively high after negotiations.
Despite discussing such high tax rates in the global trade war, the impact of these developments on macroeconomic data appears to be limited for now. One reason for this is that economies growing rapidly in the first half of the year due to pre-ordered shipments have kept their annual averages high, and another is the efforts of companies exporting to the US, in particular, to avoid reflecting inflation to the final consumer by reducing prices. In an environment where inflation has not risen significantly, the fact that demand has not changed much also seems to have limited the effects on growth. However, fiscal policy measures taken by countries to overcome the trade war, high-rate investment demands, and the burdens brought by military expenditures appear to have started fueling economic and political problems in many European and Asian countries. In the medium term, there is a serious possibility that you will see more negative impacts of the trade war on growth and inflation.
Note: You can read the full text of the article prepared by Erhan Aslanoğlu for PLASFED readers on our website plasfed.org.tr.
This content has been translated using artificial intelligence technology.