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Turkey becomes a short-term investor haven from Trump

Turkish president Tayyip Erdoğan at the White House with Donald Trump in 2019. Any US tariffs directed at the EU or China could hurt Turkey Reuters/Joshua Roberts
Turkish president Tayyip Erdoğan at the White House with Donald Trump in 2019. Any US tariffs directed at the EU or China could hurt Turkey
  • Investor appetite picks up
  • Turkish bonds attract $1.9bn
  • Foreigners hold 10% of debt

Turkey is being seen as a relatively safe harbour among emerging markets by investors looking to shield their funds from aggressive US trade policies, although Ankara is not immune to Washington’s ire. 

There has been a recent move back into Turkish debt stock, with local bonds attracting $1.9 billion in foreign capital in the first three weeks of 2025.

Foreign investors now hold just over 10 percent of government debt, similar to levels in 2019. 

Although they are increasing, this is still well short of the 25 percent posted mid-2018, when uncertainty over government economic policy meant funds retreated from the market. 

This investor appetite is likely to expand further later this year, believes Iris Cibre, a financial markets executive. 

“As interest rates fall, and the commitment to orthodox monetary policies continue, we will see more of a move into stocks that we are already seeing into bonds,” she says, though adding that this movement will not extend into direct investments. 

“The main reason for this is unpredictability in the economy as rules and regulations can change very rapidly,” Cibre says.

“In terms of foreign investors, the appetite to make long-term commitments is low for now.”

With unpredictability a leitmotif of the new Trump administration, Turkey could find itself on the wrong side of the US economic ledger. 

Direct action targeting the EU or China, such as the across-the-board 10 percent or more increase in tariffs proposed by Trump, could have a flow-on effect for Turkey. 

With the EU Turkey’s largest trading partner, and Beijing now Ankara’s biggest single bilateral trade partner, any US policies that slowed economic growth in either could weaken demand for Turkish goods and services in these key markets. 

“The EU economies are already stagnant,” Özgür Ünlühisarcıklı, the Ankara office director at the German Marshall Fund of the US, tells AGBI.

“If the EU economies are harmed by tariff increases Turkey would be hurt as well.”

Though it is assumed that Turkey-US relations under the new Trump presidency will be better than the previous administration, there are also risks to the relationship, he says. 

“One of the greatest is the issue of Israel,” says Ünlühisarcıklı.

“In the Trump era, the US will increase its support for Israel at every level. On the other hand, Turkey’s reality is to retain its support for the Palestinians and Hamas. This poses a real risk of tension.”