Updated January 15, 2020
U.S.-Turkish Trade Relations
Turkey, a NATO ally and emerging market straddling
Figure 1. U.S. Trade in Goods with Turkey
Europe and the Middle East, offers potential for U.S. trade
and investment. U.S.-Turkish trade ties are relatively weak
overall, and their further expansion depends on a number of
economic and political factors. At a time of continued
bilateral tension, Congress is monitoring U.S.-Turkish trade
ties and related policy developments more intensively, as
well as considering possible sanctions against Turkey.
Turkey’s Economy
At $767 billion in gross domestic product (GDP, current
dollars), Turkey was the world’s 19th largest economy in
2018. After a financial crisis in the early 2000s, Turkey’s
economy largely rebounded, due to Turkish government
Source: CRS, data from U.S. International Trade Commission.
actions to make market-oriented reforms, improve rule of
law in commercial markets, and invest in infrastructure. EU
Services. In 2018, bilateral services trade ($5 billion) was
membership prospects also helped drive economic reforms,
about a quarter of bilateral goods trade. U.S. services
but Turkey’s EU bid is stalled currently. Despite economic
exports were $3.1 billion and imports were $1.8 billion,
growth, Turkey continues to face challenges, including
resulting in a trade surplus of over $1 billion. Travel (e.g.,
sizeable debt denominated in foreign currencies and high
for education or business), transport, and business services
inflation. In late 2018, a currency crisis in Turkey eroded
were top traded services. Charges for Turkish use of U.S.
investor confidence. Economic growth subsequently
intellectual property rights (IPR) was a top U.S. export.
slowed, and the Turkish government is engaged in
Foreign Direct Investment (FDI). While Turkey accounts
expansionary policies to boost the economy. Downside
for less than 0.1% of the stock of U.S. FDI abroad and FDI
risks to the Turkish economy remain, including domestic
in the United States, bilateral investment ties are notable in
political uncertainty and foreign policy tensions.
some respects. U.S. majority-owned multinational firms in
Turkey has reduced its trade barriers since 1995, following
Turkey had 55,000 employees in 2017, and, for some U.S.
its accession to the World Trade Organization (WTO) and
companies, Turkey serves as a regional base for doing
conclusion of a Customs Union with the EU, which allows
business. Turkey was the 9th-fastest-growing source of U.S.
free movement of goods between Turkey and the EU
inbound FDI in 2018. According to official Turkish data,
(excluding agriculture, coal, and steel). Turkey has a well-
between 2003 and 2018, the United States cumulatively
diversified export base, but relies heavily on energy
comprised 8.8% of Turkey’s inbound FDI. The EU, at a
imports. Turkish firms are typically toward the end of
share of 68.6%, ranked as Turkey’s largest source of FDI.
global supply chains, manufacturing most end-use products
Key Trade Issues
of high-value and sourcing intermediate inputs elsewhere.
One exception is the Turkish auto industry, which supplies
Tariffs. On October 14, 2019, after Turkey’s incursion into
components to major global auto manufacturers. Turkey
northeast Syria, President Trump announced plans to apply
also recently unveiled prototypes of what it hopes will be its
sanctions against Turkey and raise “Section 232” national-
first domestically-produced electric car.
security-based tariffs on U.S. steel imports from Turkey
from 25% back to 50%. While the Administration applied
Bilateral Trade and Investment Ties
the sanctions and then lifted them after an announced cease-
Goods. Turkey is a small but growing U.S. trading partner
fire in hostilities, it has not applied the tariff increase.
(see Figure 1). In 2018, two-way goods trade accounted for
Section 232 steel tariffs on Turkey, when first applied in
less than 1% of U.S. global trade in goods. The United
March 2018, were 25%, in line with other countries subject
States exported $10.2 billion in goods to Turkey (led by
to the tariff measure. In August 2018, the President doubled
civilian aircraft, engines, and parts; waste and scrap; cotton;
steel tariffs to 50% for Turkey, on the basis that U.S. steel
coal; and petroleum refinery products), and imported $10.3
imports had not declined as much as expected and U.S.
billion in goods from Turkey (led by iron and steel
domestic steel capacity use had not risen to the target level.
products; carpets and rugs; autos and other light-duty motor
Some analysts argued, however, that the new steel tariffs
vehicles; petroleum refinery products; and stone products).
appeared to be at least partly linked to Turkey’s prosecution
The trading relationship is more consequential for Turkey.
of a U.S. pastor whose release President Trump had
The United States was both its fourth largest market for
demanded; the pastor was released in October 2018. In May
exports (5.5% share) and imports (5.1%). The EU, overall,
2019, the President lowered the steel tariffs on Turkey to
is Turkey’s leading trading partner, representing 47.8% of
25%, citing the decline in U.S. steel imports from Turkey
its exports and 36.4% of its imports. (WTO, 2017 data.)
and improved U.S. industry capacity utilization.
https://crsreports.congress.gov
U.S.-Turkish Trade Relations
In 2018, Turkey was the 12th-largest supplier of U.S. steel
Turkish-EU Customs Union. Under the Customs Union,
imports under the Section 232 tariffs, accounting for $774.7
Turkey is bound to the EU’s common external tariff with
million (or 2.6%) of the relevant U.S. steel imports. This
“third countries.” As a result, Turkey must open its market
represented a decline of 35.1% compared to 2017. The
to countries with which the EU has trade agreements, on
United States historically has been a top destination for
terms negotiated by the EU; yet, Turkey does not have any
Turkish steel exports. Turkey is shifting its steel exports
guarantee that these countries will grant Turkey reciprocal
more to other markets, such as in Europe.
access to their markets. This potential imbalance is of
Turkey has retaliated against the U.S. tariff measures. In
growing significance for Turkey as the EU negotiates trade
June 2018, Turkey applied tariffs ranging from 5% to 40%
agreements with larger countries. Turkey and the EU have
on $1.8 billion of imports from the United States (e.g.,
expressed interest in renegotiating the Customs Union, but
Turkey’s political situation make the prospects uncertain.
foodstuffs, paper, plastic, structural steel, machinery, and
vehicles). Following the doubling of the steel tariffs in
Turkish-U.S. Trade Negotiations. During the Obama
August 2018, Turkey adjusted tariffs on the U.S. imports it
Administration, Turkey sought to negotiate a free trade
originally targeted to rates ranging from 4% to 140%. After
agreement (FTA) with the United States, prompted by
the U.S. tariff reduction on Turkish steel, Turkey revised its
concerns about the impact of the proposed U.S.-EU
retaliatory tariffs to rates ranging from 4% to 70%.
Transatlantic Trade and Investment Partnership (T-TIP).
The tariff measures are subject to challenges in the WTO.
Instead, the United States and Turkey engaged in other
Turkey joined the EU’s complaint against the U.S. Section
ways to address concerns (Table 1). Under the Trump
232 measures, and also launched its own complaint in
Administration, the T-TIP negotiations ceased, but new
August 2018 against the U.S. doubling of tariffs on steel
U.S.-EU trade negotiations, depending on their progress,
and aluminum imports from Turkey. (The doubling of
could renew Turkey’s interest in a bilateral FTA.
aluminum tariffs, which President Trump announced at the
Meanwhile, the Administration has expressed interest in a
same time as he announced the doubling of the steel tariffs,
deal to grow U.S.-Turkish trade to $100 billion, four times
has not been applied.) The United States is challenging the
the 2018 level of trade. Prospects for a deal may be tied to
retaliatory actions of Turkey, the EU, and other trading
improvement in bilateral relations on other issues. In
partners in the WTO. Separately, the U.S. Court of
October 2019, at the same time that he announced the
International Trade is allowing a challenge by a U.S. steel
planned increase of the steel tariffs back to 50%, President
importer against the U.S. government for August 2018
Trump also announced an immediate stop to trade talks. In
action to double the Section 232 tariffs against Turkey.
November 2019, President Trump raised with President
Other Trade Barriers. The United States is a generally
Erdogan the idea of reopening trade talks under certain
open market; by value, 79.3% of Turkish agricultural
conditions, eliciting mixed responses within Congress.
exports and 68.7% of Turkish non-agricultural exports
Table 1. Select Past U.S.-Turkey Trade Engagement
entered the United States duty-free in 2017. U.S. firms,
meanwhile face challenges doing business in Turkey. Issues
1990 Bilateral Investment Treaty (BIT) entered into force
cited by the U.S. Trade Representative include Turkey’s:
Signed a Trade and Investment Framework Agreement
1999
(TIFA) to engage on a range of issues
bureaucracy and weakening rule of law;
Launched a strategic framework of economic and
“forced” localization barriers to trade, such as requiring
2009 commercial cooperation
storage of Turkish citizens’ personal data within Turkey;
Established bilateral high-level committee to explore
high average agricultural tariffs (41.8%, versus 5.3% by
2013 T-TIP’s effects and ways to liberalize bilateral trade
the United States) and hikes on tariffs in multiple
Revived TIFA to discuss issues such as digital
sectors, which are within WTO limits (high “bound”
2017 economy, IPR, and market access
rates) but increase uncertainty for U.S. exporters; and
2019 Turkey’s eligibility for GSP was terminated
inadequate IPR regime, including Turkey’s role as a
source of and transshipment point for counterfeit goods.
Selected Issues for Congress
Generalized System of Preferences (GSP). Effective May
What are the benefits and costs of addressing U.S.-
2019, the Trump Administration ended Turkey’s eligibility
Turkey differences through continued tariff escalations
for GSP, a U.S. trade and development program that grants
or a bilaterally negotiated resolution, or in the WTO?
non-reciprocal, duty-free treatment to certain U.S. imports
What are options for the United States and Turkey to
from developing countries that meet eligibility criteria. The
grow their bilateral trade? Is such a focus desirable?
President cited Turkey’s increased level of economic
What are the implications of using tariffs as a sanction
development, a GSP criterion, as the reason for ending
against Turkey for bilateral ties and U.S. trade policy?
Turkey’s eligibility, pointing to Turkey’s rise in gross
national income per capita, declining poverty rates, and
For more information, see CRS Report R44000, Turkey:
greater export diversification. In 2018, U.S. GSP imports
Background, U.S. Relations, and Sanctions In Brief, by Jim
from Turkey (e.g., jewelry, stones, and motor vehicle parts)
Zanotti and Clayton Thomas and CRS In Focus IF10957,
were 18% of all U.S. imports from Turkey. While Turkey
Turkey’s Currency Crisis, by Rebecca M. Nelson.
was GSP’s fifth-largest user in 2018, the amount of
Shayerah Ilias Akhtar, Specialist in International Trade
Turkish-U.S. trade under GSP ($1.9 billion) was a small
share of Turkey’s world exports ($168 billion).
and Finance
IF10961
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U.S.-Turkish Trade Relations
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https://crsreports.congress.gov | IF10961 · VERSION 3 · UPDATED