Updated January 14, 2021
U.S.-Turkey Trade Relations
Turkey, a NATO ally and emerging market straddling
products of high-value and sourcing intermediate inputs are
Europe and the Middle East, offers potential for U.S. trade
elsewhere. An exception is the Turkish auto industry, which
and investment. U.S.-Turkish trade ties are relatively weak
supplies components to major global auto manufacturers.
overall, and their further expansion depends on a number of
Bilateral Trade and Investment Ties
economic and political factors. At a time of continued
Goods. In 2019, U.S.-Turkey two-way goods trade (see
bilateral tension, including over Syria and U.S. sanctions
Figure 1) accounted for less than 1% of U.S. global trade in
against Turkey’s defense procurement agency for its
goods. The United States exported $10.3 billion in goods to
purchase of an S-400 air defense system from Russia,
Turkey (led by civilian aircraft, engines, and parts; waste
Congress may seek to more closely monitor U.S.-Turkish
and scrap; and cotton), and imported $10.6 billion in goods
trade ties and related policy developments.
from Turkey (led by carpets and rugs; autos and other light-
Turkey’s Economy
duty motor vehicles; and petroleum refinery products).
(U.S. Bureau of Economic Analysis (BEA) and U.S.
At $754 billion in gross domestic product (GDP, current
International Trade Commission.)
dollars), Turkey was the world’s 19th largest economy in
2019. After a financial crisis in the early 2000s, Turkey’s
Figure 1. U.S. Trade in Goods with Turkey
economy rebounded, due to the Turkish government’s
market-oriented reforms, strengthening of the rule of law in
commercial markets, and investments in infrastructure. EU
membership prospects helped drive economic reforms, but
Turkey’s EU bid is stalled currently. Turkey continues to
face challenges, including concerns about corruption and
rule of law, sizeable debt denominated in foreign
currencies, and high inflation. An ongoing currency crisis
has eroded investor confidence; the effectiveness of recent
efforts to restore confidence with leadership changes and
interest rate hikes is unclear. Turkey’s economy has
experienced slower growth in recent years, and it was
projected to have contracted in 2020 amid the Coronavirus
Source: CRS, data from U.S. Bureau of Economic Analysis.
Disease 2019 (COVID-19) pandemic, though perhaps not
as significantly as some regional neighbors’ economies.
The trading relationship is more consequential for Turkey.
The United States accounted for 5.0% of Turkey’s exports,
Turkey has reduced its trade barriers since 1995, following
following the 27-member EU (43.1%), the UK (6.2%), and
its accession to the World Trade Organization (WTO) and
Iraq (5.6%). As for Turkey’s imports, the United States had
conclusion of a Customs Union with the EU, which allows
a 5.6% share, following the EU (32.4%), Russia (11.0%),
free movement of goods between Turkey and the EU
and China (9.1%). (WTO, 2019 data.)
(excluding agriculture, coal, and steel). The Customs Union
binds Turkey to the EU’s common external tariff. As such,
Services. In 2019, bilateral services trade ($6.2 billion) was
Turkey must open its market to countries with which the
about one-third of bilateral goods trade. U.S. services
EU has trade agreements, on terms negotiated by the EU;
exports were $4.2 billion and imports were $2.0 billion,
yet, Turkey lacks any guarantee that these countries will
resulting in a trade surplus of $2.2 billion. Transport, travel,
grant Turkey reciprocal market access. This potential
and business services were top traded services. Charges for
imbalance is of growing significance for Turkey as the EU
Turkish use of U.S. intellectual property rights (IPR) were a
negotiates more economically consequential trade
top U.S. export. (BEA data.)
agreements. Turkey and the EU have expressed interest in
Foreign Direct Investment (FDI). While Turkey accounts
renegotiating the Customs Union, but ongoing Turkey-EU-
for a fraction of the stock of outbound and inbound U.S.
tensions, including over Cyprus and the Eastern
FDI, bilateral investment ties are notable in some respects.
Mediterranean, make the prospects uncertain. On December
U.S. majority-owned multinational firms in Turkey had
29, 2020, Turkey and the UK signed a trade deal to
57,000 employees in 2018, and, for some U.S. companies,
continue tariff-free bilateral trade following the UK’s
Turkey serves as a regional business hub. Turkey was the
departure from the EU; under the deal, Turkey and the UK
9th-fastest-growing source of U.S. inbound FDI in 2019.
also committed to exploring options to expand the
agreement to include agriculture and services.
According to official Turkish data, between 2003 and 2019,
the United States cumulatively comprised 7.3% of Turkey’s
Turkey’s export base is diversified, but relies heavily on
inbound FDI, ranking as Turkey’s second-largest source of
energy imports. Turkish firms are typically toward the end
FDI—after the Netherlands (16.1%), and ahead of Gulf
of global supply chains, manufacturing most end-use
https://crsreports.congress.gov
U.S.-Turkey Trade Relations
countries (Turkey’s categorization, 7.0%) and the UK
Turkey’s DST, alongside investigations of the DSTs of
(7.0%).
some other countries. On January 6, 2021, the U.S. Trade
Selected Trade Developments and Issues Representative (USTR) released findings in the Section 301
investigations again Turkey; it found that the DST was
Tariffs. The Trump Administration adjusted twice the
discriminatory, was inconsistent with prevailing principles
original “Section 232” U.S. national-security-based tariffs
of taxation, and burdened or restricted commerce. USTR
of 25% on steel imports from Turkey. In August 2018,
opted to not take any specific actions but to continue to
President Trump doubled steel tariffs to 50% for Turkey,
monitor all options.
citing that U.S. steel imports had not declined as much as
Other Trade Barriers. U.S. firms face challenges doing
expected and U.S. domestic steel capacity use had not risen
business in Turkey. Issues cited by USTR include Turkey’s:
to the target level. Some analysts argued, however, that the
bureaucracy and weakening rule of law;
new steel tariffs appeared to be at least partly linked to
Turkey’s prosecution of a U.S. pastor whose release
“forced” localization barriers to trade, such as requiring
the
storage of Turkish citizens’ personal data within Turkey;
President sought; the pastor was released in October 2018.
In May 2019, President Trump lowered the steel tariffs on
high average agricultural tariffs (20.4%, versus 4.6% by
Turkey to 25%, citing the decline in U.S. steel imports from
the United States, trade-weighted average tariffs) and
Turkey and improved U.S. industry capacity utilization.
hikes on tariffs in multiple sectors, which are within
WTO limits (high “bound” rates) but increase
Turkey has been shifting its steel exports more to other
markets, such as in Europe.
uncertainty for U.S. exporters; and
an inadequate IPR regime, including Turkey’s role as a
In June 2018, following the Administration’s original
source of and transshipment point for counterfeit goods.
imposition of steel tariffs, Turkey applied retaliatory tariffs
ranging from 4% to 70% on $791 million of imports from
Bilateral Trade Negotiations. During the Obama
the United States (based on 2019 trade). Turkey adjusted
Administration, Turkey sought to negotiate a free trade
these tariffs to rates ranging from 4% to 140%, following
agreement (FTA) with the United States, prompted by
the U.S. doubling of the steel tariffs in August 2018, but
concerns about the impact of the now-ceased U.S.-EU
later withdrew the additional increases after the United
Transatlantic Trade and Investment Partnership (T-TIP)
States reduced tariffs on Turkish steel.
negotiations. Instead, the United States and Turkey engaged
in other ways to address concerns (see Table 1).
In October 2019, after a Turkish incursion into northeast
Syria, President Trump announced plans to apply sanctions
The Trump Administration expressed interest in a deal to
against Turkey and raise tariffs on U.S. steel imports from
expand U.S.-Turkish trade. However, in October 2019, at
Turkey from 25% back to 50%. While the Administration
the same time that he announced the planned increase of the
applied and then lifted the sanctions after an announced
steel tariffs back to 50%, the President also announced a
cease-fire in hostilities, it did not apply the tariff increase.
stop to trade talks. In November 2019, President Trump
raised with President Erdogan the idea of reopening trade
The United States and Turkey are challenging each other’s
talks under certain conditions, eliciting mixed responses
tariff measures in the WTO. Separately, in a challenge by a
within Congress. Prospects for potential future talks may be
U.S. steel importer against the U.S. government for
tied to improvement in bilateral relations on other issues, as
doubling the tariffs on steel imports from Turkey, the U.S.
well as any potential future U.S.-EU trade talks.
Court of International Trade held that the increase did not
follow Section 232 procedural requirements.
Table 1. Select Past U.S.-Turkey Trade Engagement
Generalized System of Preferences (GSP). Effective May
1990 Bilateral Investment Treaty (BIT) entered into force
2019, the Trump Administration ended Turkey’s eligibility
1999 Signed a Trade and Investment Framework Agreement
for GSP, a U.S. trade and development program that grants
(TIFA) to engage on a range of issues
non-reciprocal, duty-free treatment to certain U.S. imports
2009 Launched a strategic framework of economic and
from developing countries that meet eligibility criteria. The
commercial cooperation
President cited Turkey’s increased level of economic
2013 Established bilateral high-level committee to explore
development, a GSP criterion, as the reason for ending
T-TIP’s effects and ways to liberalize bilateral trade
Turkey’s eligibility, pointing to Turkey’s rise in gross
2017 Revived TIFA to discuss issues such as digital
national income per capita, declining poverty rates, and
economy, IPR, and market access
greater export diversification. In 2018, U.S. GSP imports
2019 Turkey’s eligibility for GSP was terminated
from Turkey (e.g., jewelry, stones, and motor vehicle parts)
were 18% of all U.S. imports from Turkey. While Turkey
Selected Issues for Congress
was GSP’s fifth-largest user in 2018, the amount of
To what extent would a Biden Administration continue
Turkish-U.S. trade under GSP ($1.9 billion) was a small
or change U.S. trade policy with respect to Turkey?
share of Turkey’s world exports ($168 billion).
What are the benefits and costs of addressing trade
Digital Services Tax (DST). In March 2020, Turkey
differences through continued tariff escalations or a
launched a DST of 7.5% that applies to certain digital
bilaterally negotiated resolution, or in the WTO?
services suppliers with revenues above a certain threshold
What are options for the United States and Turkey to
that are supplying services domestically in Turkey. Some
grow their bilateral trade? Is such a focus desirable?
U.S. companies expressed concern that specific aspects of
See CRS Report R44000, Turkey: Background and U.S.
the DST target them. The Trump Administration
Relations In Brief, by Jim Zanotti and Clayton Thomas.
subsequently launched a Section 301 investigation into
https://crsreports.congress.gov
U.S.-Turkey Trade Relations
IF10961
Shayerah I. Akhtar, Specialist in International Trade and
Finance
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https://crsreports.congress.gov | IF10961 · VERSION 5 · UPDATED