Türkiye’s central bank on Wednesday simplified its reserve requirement framework by abolishing the additional lira reserve requirement previously applied to foreign currency deposits/participation funds.

The Central Bank of the Republic of Türkiye (CBRT) also said it was raising reserve ratios for foreign currency liabilities.

In a statement, the bank said the move sought to “strengthen macrofinancial stability and support the monetary transmission mechanism.”

Under the decision, the requirement introduced in 2023 obliging banks to hold additional Turkish lira-denominated reserve requirements against foreign currency deposits and participation funds has been terminated. The additional reserve ratio had most recently been set at 2.5%.

At the same time, the CBRT increased reserve requirement ratios for foreign currency deposits.

It said the reserve requirement ratios applied to foreign currency deposits/participation funds had been revised to 32% from 30% for demand deposits and deposits with maturities up to one month, and to 28% from 26% for those with longer maturities.

Foreign currency

deposits/participation funds

Previous ratio New ratio Demand deposits and deposits with

maturities up to 1 month

30% 32% With longer maturities 26% 28%

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Türkiye’s manufacturing activity contracted again in June after a slight rebound in May, as the war in the Middle East disrupted demand and supply, a business survey showed on Wednesday.

The Istanbul Chamber of Industry’s (ISO) Türkiye Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 47.1 in June from 49.8 in May. The 50-mark separates growth from contraction.

Output returned to decline after rising slightly in May, with firms citing market uncertainty linked to the conflict in the Middle East, softer new orders and higher prices.

Demand weakened further, with total new orders posting a solid decline, and new export business also falling again after expanding in May.

The June survey reversed some of May’s improvement and extended the sector’s downturn to 27 consecutive months. Firms also reduced stocks of purchases and finished goods amid muted demand conditions, the panel showed.

“The Turkish manufacturing sector took a step back in June, posting a renewed softening of production amid muted new orders. Anecdotal evidence from the survey indicated that the war in the Middle East continued to be the principal cause of the challenges facing firms,” said Andrew Harker, economics director at S&P Global Market Intelligence.

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U.S. retailers are speeding up their orders from China, moving up orders by four to six weeks to secure inventories for Black Friday and Christmas holiday sales before expected tariff hikes later this year, shipping executives said.

U.S. ⁠President Donald Trump’s visit to China last month ⁠has preserved the detente between the world’s two largest powers, but uncertainty remains high.

A universal 10% U.S. tariff imposed by Washington in February, after the Supreme Court declared some earlier tariffs illegal, expires on July ​24, but it is widely expected to be replaced with higher levies.

The U.S. ​Trade ⁠Representative has proposed a 12.5% tariff on imports from China and elsewhere following an investigation into forced labor, which Beijing denies, with a final decision expected in the coming months.

“There is an expectation that tariffs could be raised again, or restored to previous levels, so everyone is rushing to get goods in before that happens,” said Tony Meng, a China-based senior sales manager at shipping firm XPD Global.

U.S. exports expected strong in June

Usually, such orders peak in July through September, but shipping firms said volumes in May and June were higher than expected, contributing to a spike in shipping prices.

The frontloading means that the 35% growth in U.S. imports from China in May, which overshadowed April’s 11% growth and March’s contraction, could be sustained in June but may fade later in the summer.

Exports have been a key ⁠growth ⁠driver this year for China, compensating for structural weakness in domestic demand and building on a strong 2025 when the world’s second-largest economy posted a record $1.2 trillion trade surplus.

China’s top U.S. export items by value in May included smartphones, lithium-ion batteries, solid-state drives, toys, kitchenware and festival products. June data will be released on July 14.

Shipping group Maersk said in a statement to Reuters that container space has been tightening on the China-U.S. route since mid-May, due to “stronger customer demand and earlier seasonal bookings.”

A China-based shipping executive, who requested anonymity because he was not authorized to speak to the media, said back-to-school items such as stationery and apparel were part of the May-June frontloading, ⁠while early Christmas stockpiling also played a role.

He added May’s rise was also due to soccer World Cup-related orders, including jerseys, flags, souvenirs and large-screen TVs. The U.S. co-hosts the tournament with Canada and Mexico.

Shipping costs rise

Maritime consultancy Drewry’s World Container Index showed spot shipping rates ​from Shanghai to New York on June 25 were $7,149 per 40-foot container, 6% higher than a week before ​and 25% up on the year.

On the Shanghai to Los Angeles route, the cost was $5,750, 12% up on the week and 54% higher on the year.

“Importers continue frontloading shipments ahead of potential tariff changes ⁠and higher bunker-related ‌costs,” a Drewry ‌report said.

Outdoor furniture maker Jin Chaofeng said it would be hard to pass the ⁠entire cost of shipping fees on to customers, pointing to thin ‌pricing power and profit margins for Chinese manufacturers in less technologically advanced sectors.

Kyle Henderson, CEO and co-founder of container-tracking software provider Vizion, warned, however, ​that tariffs still weigh on overall U.S. demand ⁠, which remains below its three-year average and should only be described as “normal-to-soft.”

The higher shipping ⁠costs reflect capacity management by transport firms more than surging U.S. demand, Henderson said, citing some cancelled sailings in ⁠recent weeks.

Henderson expects volumes to ​drop after July and into the third quarter due to a “combination of inventory already landed and a tariff environment that structurally raises the cost of China-origin goods.”

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Türkiye’s foreign trade deficit narrowed 15.6% year-over-year in May, as imports fell more sharply than exports, official data showed on Tuesday.

Exports totaled $22.46 billion (TL 1.05 trillion), down 9.5% from the same month last year, while imports dropped 10.8% to $28.07 billion, according to provisional figures from the Turkish Statistical Institute (TurkStat) and the Trade Ministry.

The foreign trade gap fell to $5.61 billion in May from a year earlier.

The export-import coverage ratio rose to 80% in May, compared with 78.9% in the same month of 2025.

Excluding energy products and non-monetary gold, exports fell 11.5% to $20.5 billion, while imports dropped 16.2% to $21.03 billion. The trade deficit excluding these items stood at $525 million, while the coverage ratio was 97.5%.

Tuesday’s figures showed energy accounted for nearly one-quarter of Türkiye’s total imports in May, rising 43.4% year-over-year to $6.11 billion.

Crude oil imports increased 1.7% year-over-year to 2.67 million tons, up from 2.62 million tons in the same month last year.

This January through May, overall exports edged up 0.2% year-over-year to $111.12 billion, while imports rose 1.1% to $153.83 billion.

The foreign trade deficit rose 3.6% in the first five months of the year to $42.72 billion. The export-import coverage ratio fell to 72.2%, from 72.9% in the same period last year.

Germany was Türkiye’s top export destination in May, with shipments totaling $1.71 billion, followed by the U.S. with $1.52 billion, the U.K. with $1.38 billion, Italy with $1.14 billion and Spain with $922 million.

Russia was the leading source of imports, with $3.76 billion, followed by China with $3.43 billion, Germany with $2.04 billion, the U.S. with $1.21 billion and Italy with $1.06 billion.

Manufacturing products accounted for 94.5% of total exports in May, while intermediate goods made up 72.7% of total imports.

The share of high-technology products in manufacturing exports was 3.1% in May, while high-tech products accounted for 11.8% of manufacturing imports.

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The European Union’s proposed Industrial Accelerator Act (IAA) – aiming to boost production in strategic sectors – will be decisive in the future of production and supply chain ties between Türkiye and the bloc, business leaders argued.

The flagship framework lies upon a “Made in EU” specification, requiring specific shares of member states involved in procurement, state aid, and various incentive programs.

The regulation aims to support European production, especially in clean technologies, the automotive sector, batteries, steel, chemicals and critical raw materials, to reduce its dependence on China and boost its production capacity.

The regulation could impact the bloc’s supply chain ties with Türkiye, depending on the extent to which products made in the country will be recognized within the Union origin requirements criteria or “EU content.”

Türkiye is highly integrated into Europe’s production and supply chains across many sectors due to the customs union, playing an active role in sectors ranging from automotive and machinery to steel and chemicals, with Turkish industrial products holding a massive share in the EU market.

Origin question

The draft includes an approach to evaluate production originating from Türkiye as European under certain conditions, but business leaders say this amounts more to preserving the current status quo than creating a new opportunity for Turkish firms.

The draft could potentially change amid negotiations between member states and the European Parliament (EP).

The definition of European content is limited to production carried out in member states, which could harm Turkish producers by reducing their access to certain incentives and public procurement, resulting in Turkish firms benefiting less from the bloc’s industrial incentives and creating a competitive disadvantage against European rivals.

Experts said excluding Türkiye from the Made in EU specification would increase costs for Turkish manufacturers and numerous European firms that rely on Turkish suppliers.

Auto sector

The auto sector is expected to be one of the most affected by the regulation, as Türkiye is one of Europe’s major vehicle production hubs, playing a key role in the supply chains of many global automakers.

Türkiye could secure a stronger position in Europe’s green transition and clean industry investments if kept within the framework.

Mehmet Ali Yalçındağ, chair of the Türkiye-Europe Business Council at the Foreign Economic Relations Board (DEIK), stated that Türkiye has been integral in Europe’s supply and value chains for nearly three decades with the customs union, noting that evaluation products made in the country under the Made in EU approach are significant.

He said the auto industry would be the most affected as it is not limited to vehicle production but involves multi-layered value chains like battery technologies, semiconductors, critical raw materials, software, artificial intelligence production systems and energy efficiency.

He noted that Türkiye is one of Europe’s key partners in green and digital transformation due to its strong auto supply industry, advanced supplier network, engineering capabilities, electric vehicle (EV) ecosystem and investments in low-carbon production.

“It is a strategic necessity to ensure products made in Türkiye are integrated into Europe’s industrial ecosystem without being subjected to quotas, obstacles or additional barriers, not only for the Turkish private sector but also for the EU’s industrial transformation and global competitiveness,” he said.

“Excluding Türkiye would affect Turkish firms and EU firms investing in Türkiye alike, as well as European manufacturers sourcing from Türkiye, affecting the bloc’s competitive production capacity; restricting Turkish production in strategic sectors would drive up costs, reduce the resilience of supply chains and weaken the EU industry against global competitors,” he added.

Yalçındağ urged the bloc to focus on updating the customs union and implementing common industrial policies to further existing integration instead of creating new barriers.

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Türkiye and Pakistan, which recently played a leading role in facilitating an understanding as mediators in negotiations between Iran and the U.S., are now turning their intensive diplomatic engagement toward expanding economic cooperation, according to a report on Tuesday.

According to information obtained by Anadolu Agency (AA), Pakistani Prime Minister Shahbaz Sharif will pay an official visit to Türkiye on July 2-4, accompanied by ministers and business representatives.

Sharif, who will visit at the invitation of President Recep Tayyip Erdoğan, is scheduled to hold bilateral and delegation-level meetings, while a Türkiye-Pakistan Business Forum will also take place.

Against this backdrop, the two countries, which have significantly strengthened ties in recent years, particularly in trade, the economy, the defense industry and energy, are expected to elevate their cooperation to a new level.

During their talks, Erdoğan and Sharif will review political and diplomatic relations while placing particular emphasis on economic cooperation, the AA report indicated.

The business forum, attended by business leaders from both countries, will focus on the investment climate in Türkiye and Pakistan, sectors with strong growth potential, and bilateral trade and investment opportunities. Business-to-business meetings will also explore new avenues for cooperation.

The discussions are expected to center on four key areas: information technology and telecommunications, oil and precious minerals, a special economic zone planned to be allocated to Türkiye, and the privatization of Pakistan’s electricity distribution companies.

Ministers responsible for these investment sectors are also expected to participate in the forum.

Last week, Ankara said it would support Pakistan’s electricity privatization and power sector reform efforts through three newly signed cooperation agreements, with Turkish institutions set to provide expertise in transmission systems, electricity market operations, distribution monitoring and capacity building.

“We will share our experience to the fullest and do our best to support you in this highly important and sensitive process of privatizing Pakistan’s electricity sector,” Energy and Natural Resources Minister Alparslan Bayraktar said at the time.

Joint transport, energy projects on the agenda

President Erdoğan visited Pakistan in February last year as part of his South Asia tour.

The visit resulted in the signing of 24 agreements covering a broad range of sectors, including defense, energy, agriculture, trade, industry and communications.

During Sharif’s visits to Türkiye later that year, both sides also implemented decisions aimed at deepening economic ties.

Moreover, expanding transportation cooperation remains a priority on the Ankara-Islamabad agenda.

The two countries, particularly focused on road and rail connectivity, plan to revive the Islamabad-Tehran-Istanbul freight train route. Joint projects along the Middle Corridor, the China-Pakistan Economic Corridor and the Development Road route are also among the initiatives under discussion.

In addition to transport, the talks will address projects designed to strengthen energy cooperation.

Türkiye and Pakistan have already signed an oil and gas exploration and production agreement covering Pakistan’s onshore and offshore areas.

Ahead of Sharif’s visit, officials also discussed ways to facilitate Turkish companies’ participation in Pakistan’s privatization tenders, opportunities for local partnerships, and strategic steps to expand existing investments.

Türkiye’s experience and sectoral expertise in privatizing electricity distribution assets in recent years were shared with Pakistani counterparts. New decisions on these issues are expected during the visit.

Trade target set at $5 billion

Pakistan, one of Türkiye’s priority export markets, accounted for more than $1.2 billion in bilateral trade last year. Of that total, Turkish exports amounted to $866.5 million, allowing Türkiye to maintain its position as a net exporter in bilateral trade.

Ships and floating structures, and vehicles accounted for the largest share of exports at $303 million.

They were followed by cotton and cotton products at $150.2 million, and boilers, machinery and mechanical appliances at $95.5 million. Together, these three categories totaled $548.6 million, representing 63.3% of Türkiye’s exports to Pakistan.

During the first four months of this year, Türkiye’s exports to Pakistan reached $196.4 million, while imports from the country totaled $103.5 million.

The two sides hope that new agreements to be signed during the visit will pave the way toward achieving their long-standing goal of raising bilateral trade to $5 billion.

Turkish contractors undertake $3.5B in projects

According to the latest figures, Turkish investors have invested more than $2 billion in Pakistan.

Turkish contractors have undertaken projects worth $3.5 billion in the country, while Pakistan-based companies have made nearly $700 million in direct investments in Türkiye. These investments span sectors including automotive, electronics and telecommunications.

Following their recent diplomatic efforts that helped pave the way for an understanding in Iran-U.S. negotiations, Türkiye and Pakistan are now expected to use the high-level meetings scheduled for early July to open a new chapter in economic cooperation.

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