Companies from Turkey and the United States look for a compromise following an increase in import taxes
In the face of increased U.S. tariffs on Turkish imports, Turkish exporters are employing a range of creative strategies to mitigate financial impact and maintain competitiveness in the American market.
According to Mustafa Gültepe, president of the Turkish Exporters Assembly (TİM), the U.S. is currently Turkey's third-largest export market, with exports amounting to $1.57 billion in July 2022. However, the recent rise in tariffs, up to 15% on many goods and higher rates on steel, metal, and automotive products, has prompted Turkish businesses to seek alternative solutions.
One such solution is the diversification of export markets. By expanding exports to countries with lower or no tariffs, Turkish firms aim to reduce their reliance on the U.S. market.
Another strategy involves product differentiation and moving up the value chain. Turkish producers are focusing on higher-quality, niche, or specialized products less sensitive to tariffs, leveraging their "white list" moderate tariff status to compete with countries facing steeper U.S. tariffs.
Supply chain reconfiguration is another approach being considered. Turkish firms might strategically source some components or semi-finished goods from countries with more favourable tariffs or negotiate tariff quotas where available.
Companies may also absorb a portion of the tariff cost to maintain competitiveness, while enhancing operational efficiency, reducing production costs, or optimising logistics to offset tariff-induced price increases.
The Turkish government is also engaging in active diplomacy to renegotiate trade terms or seek tariff exemptions or reductions, leveraging balanced trade relations and mutual investments with the U.S. to argue against tariff hikes.
Turkish exporters are also attempting to capture market share away from competitors with higher tariff burdens by competitive pricing and marketing strategies. Legal and trade experts are exploring tariff classification and valuation strategies to ensure goods are optimally classified under HS codes that attract lower duties, or reconsider invoice valuation within regulatory limits to reduce tariff liability.
Product innovation and collaboration are other strategies being considered. Turkish exporters may develop new products or joint ventures with U.S. partners to create tariff-free or tariff-reduced categories, including assembly or localization within the U.S., which may evade direct import tariffs.
Expanding into service sectors or digital products that do not face tariffs can compensate for merchandise export pressures due to tariffs.
These strategies combined could help Turkey’s exporters soften the financial impact of U.S. tariffs and potentially emerge more competitive in international markets. The moderate nature of the tariff hike (from 10% to 15%) on most goods, contrasted with higher tariffs on steel and automotive items remaining at 25%, suggests there is still room for manoeuvring within bilateral trade frameworks.
Despite these efforts, exporters warn that the cumulative effect of tariffs in certain sectors could push total duties as high as 30%. Gültepe emphasised that the price-sensitive nature of the U.S. market means exporters must remain competitive despite rising costs.
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[1] Tariffs and Trade: Opportunities and Challenges for Turkish Exporters [2] Turkish Exporters Adapt to U.S. Tariffs with Creative Strategies [3] Turkey's Tariff Quota on Sunflower Seed and Oil
- As a result of the increased U.S. tariffs, the Turkish finance industry is seeing an increased demand for solutions to help exporters mitigate financial impact and remain competitive in the American market, with strategies including diversification of export markets, product differentiation, supply chain reconfiguration, and product innovation.
- In light of the rising political tensions and trade conflicts, the general news is covering extensive discussions of international trade relations, particularly those between the U.S. and Turkey, including the potential for financial benefits in the domestic finance sector through opportunities like high-interest CD rates offered by Miami banks for seniors.
