Economy
For Europe, 30% US tariff would be game-changer
The 30% tariff on European goods threatened by U.S. President Donald Trump would, if implemented, be a major blow to Europe, potentially dismantling large segments of transatlantic trade and compelling the bloc to reassess its export-driven economic strategy.
European ministers meeting in Brussels on Monday remained convinced they can bring Trump back from the brink before his Aug. 1 deadline and reach a deal that would keep the $1.7 trillion two-way trading relationship broadly intact.
But the wild swings in Trump’s mood toward the European Union – which he has sometimes labelled as friendly and at other times accused of being set up specifically to destroy the United States – keep the 30% threat very much alive for now.
“It will be almost impossible to continue the trading as we are used to in a transatlantic relationship,” EU trade chief Maros Sefcovic said of the 30% rate before meeting ministers and officials of the 27 EU capitals to give them an update.
“Practically, it prohibits the trade.”
EU officials had been hoping they could limit the damage by agreeing on a baseline tariff of around 10% – the one currently in place – with additional carve-outs for key sectors like autos.
Last year, the United States accounted for a fifth of all EU exports – its largest partner. Trump’s bugbear is the $235 billion U.S. deficit generated by the goods component of that trade, even though the U.S. earns a surplus on services.
Upend policy plans
The impact of making European exports – from pharmaceuticals to autos, machinery or wine – too expensive to be viable for American consumers would be instantly tangible.
Economists at Barclays estimate that an average tariff rate on EU goods of 35% including both reciprocal and sectoral duties, combined with a 10% retaliation from Brussels, would shave 0.7 percentage points off eurozone output.
This would eat up most of the eurozone’s already meagre growth and likely lead the European Central Bank (ECB) to cut its 2% deposit rate further.
“Inflation would likely undershoot the 2% target more deeply, and for longer, prompting a more accommodative monetary policy stance – with the deposit rate potentially reaching 1% by (March 2026),” the Barclays economists said.
An earlier estimate by German economic institute IW found tariffs of 20% to 50% would cost Germany’s 4.3 trillion euro economy more than 200 billion euros between now and 2028.
While arguably small in percentage terms, that lost activity could still upend Chancellor Friedrich Merz’s plans to push through tax cuts and spend more on renewing the country’s long-neglected infrastructure.
“We would have to postpone large parts of our economic policy efforts because it would interfere with everything and hit the German export industry to the core,” Merz said at the weekend of a 30% rate.
Nowhere to run
Further down the line, it raises bigger questions over how Europe recoups the lost activity to generate the tax revenues and jobs needed to fund ambitions ranging from caring for ageing populations to military rearmament.
Under its existing policy of trade diversification, the EU has done well in striking preliminary deals with new partners but – as the continued delay over completion of the giant EU-Mercosur trade pact shows – it has struggled to get them fully signed and sealed.
“The EU does not have different markets to pull up to and sell into,” Varg Folkman, policy analyst at the European Policy Centre think tank, said of the long and complex timelines involved in classic free trade deals.
Some observers have argued the standoff with Trump is what the EU needs to complete long-delayed reforms of its single market, boosting domestic demand and rebalancing its economy away from exports, which account for around half of output.
The International Monetary Fund (IMF) has estimated the EU’s own internal barriers to the free flow of activity are the equivalent of tariffs of 44% for goods and 110% for services. Mooted reforms such as creating freer cross-border capital markets have made little headway in more than a decade.
“It is easier said than done. There isn’t an agreement to deepen. The barriers are imposed by the EU members themselves to benefit their own,” Folkman said of the web of national regulations.
How all this plays into the EU’s negotiating strategy in the less than three weeks ahead remains to be seen – but for now, the bloc has stuck to its line of being open to talks while readying retaliatory measures if they break down.
One thing that might persuade Trump to reach a deal, some European observers suggest, is that the lingering uncertainty may by itself push back the timing of the Federal Reserve (Fed) interest rate cut the U.S. president so desires.
“The latest developments on the trade war suggest that it will take more time to get a sense of the ‘landing zone’ on tariffs … which of course raises uncertainty for everyone, including the Fed,” AXA chief economist Gilles Moec said.
“With this new salvo … calls for cutting quickly get even harder to justify.”
Türkiye is prepared for the opening of a key customs gate with Syria, a top trade official said on Tuesday at an event in the southeastern city of Gaziantep, which gathered officials from both countries to discuss commercial opportunities and advancing trade and integration.
Turkish officials highlighted growing economic ties with Syria during the “City Economies Summit Gaziantep-Aleppo,” announcing plans to open new customs gates and targeting a $10 billion (TL 460 billion) trade volume in the coming years.
The summit, organized by Anadolu Agency (AA) in cooperation with the Gaziantep Metropolitan Municipality, gathered Turkish and Syrian officials and businesspeople.
The summit focused on a large-scale intermediate production ecosystem planned for the border region and related investment opportunities.
Following the opening ceremony, Anadolu Economy and Finance News Department Director Serhat Akkan moderated a session titled “New Horizons in Trade for Türkiye and Syria.”
Trade Minister Ömer Bolat and Syrian Minister of Economy and Industry Mohammad Nidal al-Shaar participated as speakers in the session.
The ministers evaluated opportunities for cooperation between the economies of the two countries.
Bolat stated that the two nations aim to reach a $5 billion annual trade volume within two years and $10 billion by the early 2030s.
“We are fully prepared for the opening of the Islahiye Customs Gate, and by working together, we will be able to announce its opening as soon as possible,” he said.
Officials also informed their Syrian counterparts about their readiness to open the customs gate between Nusaybin and Qamishli.
Bolat emphasized that Türkiye gave top priority to protecting Syria’s territorial integrity and national unity following the fall of the Assad regime in December 2024.
He also informed that Turkish banks reached an agreement to open branches in Syria as central banks continue their negotiations.
Türkiye strongly supported the Syrian government to help lift embargoes imposed by the U.S. and the European Union.
Al-Shaar, for his part, underscored the importance of cooperation with Türkiye, calling the country its “natural partner.”
“Türkiye is our natural partner. We view the relation in this regard,” he said.
Noting that Damascus is drafting new regulations to support economic growth and reassessing laws related to trade, investment, banking and industry, al-Shaar urged Ankara and Damascus to become a common source of production.
“We are making efforts to establish sustainable, compatible and strong economic relations in Syria,” he said.
Despite the lifting of international sanctions imposed for years, Saar said their effects are still being felt.
He added that modernizing the banking sector remains one of the country’s top priorities.
Rebuilding process
Moreover, he stressed that rebuilding the country after 64 years of oppressive rule and years of war cannot be achieved quickly.
“Some may think we are moving slowly, but we are managing the process carefully and rationally to achieve lasting and sound results,” he said.
Al-Shaar also said Syria’s strong ties with Türkiye provide confidence amid regional fluctuations. He noted that Syrian traders and industrialists have learned to operate under crisis conditions and that the country’s economy has gained resilience against external shocks.
He praised Türkiye’s constructive role in supporting regional stability and said Syria is pleased with Ankara’s approach, expressing confidence that cooperation between the two countries will grow stronger.
Calling on Turkish investors to take a more active role in Syria, the minister said his country is now ready to absorb and support new investments.
“Syria is ready. Our country is your country too. Please come,” he said.
Long-term partnerships
Turkish Ambassador to Damascus Nuh Yılmaz described Türkiye as Syria’s gateway to global markets and Europe.
Yılmaz attended a special session as a guest, which addressed revitalized trade, logistics and production ties, alongside messages regarding regional economic integration.
He characterized Syria as a strategic logistics corridor connecting Türkiye to the Middle East and the Gulf region.
The ambassador advised investors to establish long-term partnerships rather than focusing solely on short-term trade.
He recommended the Aleppo-Idlib region as a primary investment area due to its stable energy supply and skilled workforce.
Yılmaz pointed out that security conditions in Syria improved significantly after the central government regained control of various territories.
Turkish officials also started working with the immigration authority to facilitate visa processes for Syrians making a definitive return to their home country.
Gaziantep Mayor Fatma Şahin highlighted the massive opportunities existing between Aleppo and Gaziantep.
She also called for the revitalization of historical logistics networks to boost regional trade.
Gaziantep Governor Kemal Çeber stressed the necessity of standing shoulder to shoulder to build a shared future based on historical ties.
He predicted that the border area would soon become the new economic hub of Türkiye.
The event also sought to highlight regional production, logistics and investment opportunities while creating lasting cooperation platforms between the public sector, private sector and academia.
The summit, which comprehensively addressed the revitalized trade, logistics and production ties between Türkiye and Syria, aimed to contribute to regional economic integration.
Türkiye is working on new measures to reduce financing costs for businesses, and authorities are considering mechanisms to partially offset borrowing costs through the budget, Treasury and Finance Minister Mehmet Şimşek said Monday.
Şimşek said the government could not fully absorb all financing costs but was examining models that would cover part of the cost above inflation without undermining the country’s disinflation strategy.
“Of course, it is not possible for us to fully cover all borrowing costs. However, we are working on models that would compensate part of the cost above inflation through the budget, to a certain extent and without disrupting the (medium-term) program’s balance,” he told the private broadcaster CNN Türk.
Şimşek said the government was making intensive efforts to ease financing constraints facing the real sector, highlighting export rediscount loans currently offered at interest rates of around 23.9%, well below the annual inflation rate.
“We will continue these supports and even increase them. We will not stop here. When conditions allow, we will lower financing costs further,” he said.
The minister reiterated that inflation remains on a downward trajectory despite a challenging global environment, while warning that the Iran war has generated economic effects extending well beyond higher energy prices.
Last week’s data showed Türkiye’s inflation in May increased 32.6% from a year ago, slightly higher than expected and up from 32.4% in April.
That underscored fallout from the U.S.-Iran war, which has effectively shut the key Strait of Hormuz, sending global energy prices sharply higher.
According to Şimşek, the conflict has created supply shocks across a range of strategic commodities, including oil, natural gas, chemicals, fertilizers, helium and raw materials used in semiconductor production.
He said rising energy prices were creating cost pressures across sectors ranging from textiles and footwear to agriculture, adding that lower fertilizer use could reduce agricultural productivity and place additional upward pressure on food prices.
Tighter global financial conditions, weaker demand
Şimşek also warned that tighter global financial conditions and weaker demand in some export markets could weigh on economic activity.
The minister said current oil price levels, when combined with secondary effects, were generating at least 5 percentage points of additional inflationary pressure.
“If inflation was expected to be 21%, it could be 26%,” he said.
The Central Bank of the Republic of Türkiye (CBRT) raised its year-end interim inflation target to 24% from 16% last month.
Şimşek stressed he does not attribute deviations from inflation targets solely to external shocks and acknowledged the role of domestic structural factors.
He said the government’s economic program remains focused on restoring macroeconomic stability through disinflation, fiscal discipline and a sustainable current account balance.
Türkiye’s foreign exchange reserves have risen to a level sufficient to cover roughly five months of imports, he noted, emphasizing the importance of reserve accumulation in a region exposed to geopolitical risks.
Şimşek added that Türkiye would be among the countries benefiting most if energy markets normalize following an eventual end to the conflict.
Türkiye has spent approximately $1.1 trillion on oil and natural gas imports over the past 23 years, which the minister said meant lower energy prices would rapidly feed into lower inflation.
Housing, food, transport key to cost-of-living fight
Şimşek said the fight against the cost of living remains centered on housing, food and transportation, which account for around 67% of average household spending and as much as 77% for lower-income households.
To curb housing inflation, he pointed to efforts to expand housing supply, including the delivery of 500,000 homes in 2023 earthquake-hit regions and plans to hand over another 120,000 units this year.
While rent inflation in the quake zone has fallen to around 20%, nationwide rent inflation remains just below 50%, he said.
With new social housing projects and public-supported investments, Şimşek said he expects annual rent inflation to decline to between 30% and 35% by the end of the year.
He also highlighted ongoing efforts to increase agricultural production through organized farming zones and greenhouse investments, while reducing food losses throughout the supply chain.
The minister said the effects of these structural measures would become more visible within the next two to three years.
Şimşek also referred to recently unveiled new incentives to attract investment, capital and skilled workers.
He cited corporate tax incentives for production-oriented investments, transit trade, service exports and qualified service centers as part of efforts to position Türkiye as a regional hub.
The Asian Development Bank (ADB) approved a 645.8-million-euros ($750-million) loan to finance the construction of a 127-kilometer railway line in Türkiye, advancing the country’s role as a vital transport and logistics hub linking Europe and Asia, the bank stated on Tuesday.
The Istanbul North Rail Crossing Project (INRAIL) aimed to bypass the Istanbul metropolitan area and provide a high-capacity overland rail link across the Bosporus.
The project planned to connect two main airports to the national rail network.
Asian Development Bank Director General for Central and West Asia Leah Gutierrez said this flagship rail project reinforced Türkiye’s strategic role as a key link between Asia and Europe, providing faster, high-capacity, and more reliable movement of freight.
Gutierrez stated that the collaboration of international financial institutions maximized development impact and efficiency.
The bank designed the electrified route to relieve a supply chain bottleneck for both passengers and freight.
The Asian Development Bank and the World Bank cofinanced the initiative to streamline project preparation and deliver effective development support.
Officials projected the total cost of the project to be $8.27 billion.
The bank scheduled a second loan for the same amount for consideration in 2028.
The project aligned with Türkiye’s 12th Development Plan and the Transport and Logistics Master Plan.
Earlier in March, the World Bank approved a $2 billion in financing for the same project.
Türkiye and Saudi Arabia signed two memorandums of understanding (MoUs) on Tuesday aimed at strengthening cooperation in the railway and logistics sectors to enhance regional connectivity and trade links.
The agreements were signed in Riyadh following a meeting between Transport and Infrastructure Minister Abdulkadir Uraloğlu and Saudi Minister of Transport and Logistic Services Saleh bin Nasser Al-Jasser.
According to a statement from the Turkish Transport Ministry, one memorandum focuses on cooperation in logistics services, including the construction, operation and management of logistics centers.
The second agreement aims to expand collaboration across all areas of the railway sector.
Uraloğlu said uninterrupted trade and logistics flows have become increasingly critical amid ongoing regional tensions.
“At a time when our region is going through a sensitive period, ensuring the uninterrupted functioning of trade and logistics chains has become more critical than ever. Removing obstacles facing the transport sector is a strategic necessity,” he said.
The minister noted that bilateral road freight transport between the two countries had reached around 20,000 annual trips before 2012 but declined due to regional developments.
“Although current figures remain below those levels, our goal is to move cooperation beyond its previous peak,” Uraloğlu said.
He added that Türkiye is closely monitoring developments along routes passing through Syria, Jordan and Iraq, highlighting that two pilot freight operations from Türkiye to Saudi Arabia via Iraq had demonstrated the feasibility of the corridor.
Uraloğlu emphasized the importance of expanding both bilateral and transit transport, noting that transit routes provide access to European and Gulf markets and could strengthen regional trade integration.
He also stressed the need for secure and stable highway connections between the two countries and called for coordinated planning with regional partners to establish a future road map for transport cooperation.
On rail transport, Uraloğlu said a direct railway connection between Türkiye and Saudi Arabia would be of strategic importance. He also highlighted potential cooperation in high-speed rail systems and railway rolling stock.
Apple’s newly introduced AI Siri will have limited reach among many existing users, as older iPhone models are not equipped to run sophisticated AI features, Morgan Stanley said in a research note on Tuesday.
More than 850 million iPhones are incapable of running basic Apple Intelligence queries, and more than 1.3 billion iPhones cannot use advanced Siri features, the brokerage said.
The long-delayed Siri overhaul was the centerpiece of Apple’s annual Worldwide Developers Conference on Monday, with the world’s most valuable smartphone maker betting on the feature to keep pace with rivals including OpenAI’s ChatGPT, Google’s Gemini and Anthropic’s Claude.
Selling hardware on the strength of software is challenging, Morgan Stanley cautioned, even as AI accessibility ranks among the leading drivers of smartphone upgrades.
The bottleneck for the upgraded Siri and AI tools comes down to chip architecture and memory. Users need 12 GB of unified memory to run the most advanced Siri features, owing to the volume of on-device processing that Apple Intelligence requires, the brokerage said.
The Embassy of India in Ankara and the Consulate General of India in Istanbul announced Monday that they had convened the first meeting to launch the India-Türkiye Business Association.
According to an official statement, the meeting brought together Indian and Turkish investors with established business interests in both countries.
The statement said the association would be the first business-led initiative of its kind aimed at building a dedicated community to promote trade and investment between India and Türkiye.
Participants discussed drafting the association’s charter and defining its vision, while also exploring ways to create more structured engagement between the two business communities.
The association is expected to operate as a business chamber and will be formally launched in the coming months, the statement said.
India’s Ambassador to Türkiye Muktesh Pardeshi said such organizations can help businesses in both countries build stronger ties and networks, allowing them to navigate the commercial environment more efficiently and effectively.
He emphasized that the time had come for an active, business-led body that could advocate for greater trade and investment between India and Türkiye.
Bilateral trade between the two countries currently stands at around $10 billion a year, after reaching a peak of $13.8 billion in 2023.
The statement added that both sides share the goal of raising total trade to $20 billion.
India has identified Türkiye as one of its top 25 export markets, while Türkiye has included India among the 18 countries in its targeted distant countries strategy.
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