Rising protectionism and escalating trade wars could define 2025, the head of a top Turkish business body warned on Tuesday, a day after U.S. President Donald Trump was sworn into office amid prospects of higher tariffs, also expressing caution over dynamics in Türkiye's biggest trade partner: Europe.
"We expect that 2024 and 2025 will not be very different from each other, and we expect to see a similar picture," Nail Olpak, chair of the Turkish Foreign Economic Relations Board (DEIK), told a meeting with reporters, describing the increasing prevalence of trade wars and economic bloc formations as one of the key concerns.
"While we talk about free trade on the one hand, realistically, we are discussing the growing trade wars and bloc formations in trade," Olpak said. "We anticipate that 2025 will be a year where protectionist measures, trade blocs and trade wars are discussed more intensively," he warned.
Olpak reflected on a global loss of momentum in trade, pointing to a decline in growth averages over the past five to six years, particularly among developed countries. "There's still growth, but the loss of momentum is an important headline for us," he said.
Tariffs were a central focus of Trump's election campaign and his inauguration day rhetoric. He spoke of introducing steep tariffs of 10% to 20% on global imports into the U.S., with a particular emphasis on higher rates for Canada, Mexico, and China.
On Monday, however, he refrained from taking immediate tariff action, though he indicated he was considering imposing 25% duties on imports from Canada and Mexico on Feb. 1 over illegal immigration and fentanyl trafficking into the U.S.
When asked at the White House about the possibility of a universal tariff on all imports, Trump responded, "We may. But we're not ready for that yet."
Trump had vowed to impose a 60% tariff on Chinese goods to address a trade deficit that exceeds $1 trillion annually. He also said he would tackle the U.S. trade imbalance with the European Union, either through tariffs or by boosting energy exports.
Olpak said the U.S. remains a key player in the global economy and trade dynamics but pointed to Trump's unpredictable leadership. "The fact that he is an unpredictable leader is one of the most important risks," he noted.
Olpak expressed concerns about Europe, Türkiye's key trading partner, and a lack of dynamism in its major economies, particularly Germany, the nation's top export market.
"Regarding Europe, 56% of our exports go to Europe, and 50% of our imports are sourced from there. It is our biggest trade partner," he said. "However, I think it would not be wrong if I say that we are watching Europe with some concern."
Olpak cited the demographic challenge of nearly 6 million skilled workers retiring in Germany within the next three to five years. He also addressed uncertainties after Brexit and the potential for a "Frexit" scenario, which he says adds to anxieties over the EU's future.
From Germany's point of view, Olpak said they see "a very unpleasant picture," stressing what he said they see as "an air of fatigue and reluctance in German companies."
"There is a stagnation in terms of doing business. We are meeting with all our interlocutors, both in the political and business world, and there is such a negative picture in Germany, which we did not expect."
Olpak also addressed the issue of global inflation, noting that while there has been some reduction, it has not been to the expected extent.
"We all closely followed the inflation experienced worldwide last year. Although our country's figures differ, global inflation did not proceed in a way that made the world very happy in 2024," he explained.
"Yes, there is a decrease, but the expected decline has not yet occurred."
In Türkiye, the government's medium-term program (MTP), which centers on fiscal and monetary tightening, remains a guiding framework for addressing domestic challenges, including high inflation.
The country's central bank started reversing its 18-month tightening drive last month, cutting its key interest rate by 250 basis points to 47.5%. Between mid-2023 and March 2024, the bank raised its benchmark policy rate by 4,150 basis points to curb inflation.
"Although there were aspects of 2024's economic developments that we didn't like, it continued within the framework of this MTP," said Olpak. "None of the situations like the contraction in the domestic market, the tightening of credits, or the decline in the industry were surprising."
He does not expect much to change in 2025. "Because our economic administration says: We will stick to fiscal discipline and continue to fight disinflation decisively. Therefore, we see that the braking in the domestic market will continue in 2025 as well."
Olpak noted that it is unrealistic to expect interest rates to decline to the 20s this year, citing the fact that the central bank's year-end inflation target stands at 21%.
Noting that exports ended last year with a slight increase, reaching $262 billion, Olpak said that in a process where the loss of momentum in world trade continues, it seems challenging to increase exports by large figures such as 10s of billions of dollars each year.
"There is no scenario where our goods exports will increase by $30 billion-$40 billion each year," he said.
Among others, Olpak also said Türkiye could restart trade with Israel if the cease-fire in Gaza proves to be permanent.
Türkiye suspended all bilateral trade with Israel last year until the conflict is resolved and aid can freely enter the Palestinian enclave.
Israel and Palestinian resistance group Hamas this week began carrying out a complex cease-fire deal.
"Commercial relations cut off with Israel due to Gaza may resume if peace becomes permanent," Olpak said. "Of course, I can't predict political moves. However, the permanence of peace means the reason for the trade cut-off is eliminated, and hence, trade may resume."
The DEIK chief also reflected on Syria's rebuilding after last month's ouster of longtime dictator Bashar Assad.
He emphasized that it is "too early" to discuss the restructuring of Syria and that the country needs its own resources for reconstruction.
"We are still discussing the reconstruction of Iraq and Ukraine," Olpak said, highlighting the need to discuss funding for Syria first.
"Last week, we had a meeting with the Trade Ministry on this topic, and the summary of the meeting is: Syria is important, of course, but in an environment where security has not yet been ensured, the reconstruction of the country from today to tomorrow is not an easy task."
Olpak also mentioned that DEIK has received reports regarding payment challenges for goods exported to Russia through Kazakhstan and Kyrgyzstan, though he did not elaborate further.
Following Russia's invasion of Ukraine in 2022, Western nations implemented unprecedented sanctions on Moscow. Since then, Turkish exporters to Russia have faced difficulties in securing payments.