Earlier this week, Turkey launched a cross-border offensive in Syria in order to establish a safe zone in the region. Following the cross-border offensive, Donald Trump sent a letter to President Erdogan urging him to make a deal with Kurdish fighters in Syria.

In his controversial letter to President Erdogan, Donald Trump threatened to destroy the Turkish economy if Turkey didn’t reach an agreement with the Kurdish fighters in Syria.

Donald Trump’s threat to destroy Turkey’s economy was not unfounded. The United States took strict economic measures against Turkey including a 50% increase in tariffs on Turkish steel.

President Erdogan threw Donald Trump’s letter in the bin as he ordered to continue operations in Syria. As a result, economic tension between the United States and Turkey followed.

Subsequently, the Turkish government took measures to prevent market fallout by banning short selling, and squeezing liquidity in offshore money markets. The immediate implication of the ban was a limit on Turkish lira liquidity sources for international investors.

The Istanbul Stock Exchange ruled that shareholders would not be able to sell unless shares were visible in the broker’s custody account. The decision to ban short selling in seven of Turkey’s biggest banks was a part of a greater attempt to make Turkish banks T+O settlement.

International shareholders were concerned as making Turkish banks T+O settlement would make it difficult for them to sell their shares. Additionally, the United States’ decision to file criminal charges against one of Turkey’s biggest banks for violating United States sanctions on Iran raised concerns about the possibility of further sanctions.

Both the Republican and the Democratic Party pushed for strict economic measures against Turkey. Consequently, the Turkish Lira weakened more than 4% against the USD in October.

The tension between Turkey and the United States increased the risk of investing in Turkish capital.