DUBAI — Turkish assets are breathing a sigh of relief after tariffs threatened by President Donald Trump over Ankara's military offensive in Syria came up less serious than markets had expected. Turkey's lira rose in Tuesday morning trading on the back of a statement by Trump promising a 50% tariff on Turkish steel imports and a halt to trade negotiations between Ankara and Washington — penalties that analysts are calling "window dressing." The dollar was down 1% against the lira for the session, with the Turkish currency trading at 5.8628 per dollar at 8 a.m. London time on Tuesday. The tariff threats are mere "window dressing from Trump," said Timothy Ash, senior emerging markets strategist at Bluebay Asset Management. "Minimal sanctions. A few individuals. A trade deal which was years off anyway. And steel tariffs up to 50% — Turkey hardly exports any (steel to the U.S.) anyway," Ash said in an emailed note. "Likely relief in Turkish markets — they could have been much worse."

Turkish-backed Syrian fighters near the town of Tukhar, north of Syria's northern city of Manbij, on October 14, 2019. Aref Tammawi | AFP | Getty Images

The lira was labeled the world's worst performing major currency in the second week of October as sanctions stress weighed on Turkish assets. Trump has been threatening to "totally obliterate" Turkey's fragile economy over President Recep Tayyip Erdogan's military offensive into northern Syria against U.S.-backed Kurdish forces — an operation Trump essentially greenlighted with his shock announcement to withdraw U.S. troops from the area and hand responsibility for dealing with remaining Islamic State fighters to the Turks. "These appear to be relatively light sanctions — meant to appease Congress without sundering Trump's relations with Erdogan," Charlie Roberston, global chief economist at Renaissance Capital, told CNBC.

Turkey expands assault against US-backed Kurds

The agreement between the two countries came after a phone call between Trump and Erdogan, the contents of which are not publicly known. Widespread bipartisan criticism followed Trump's announcement, described by numerous lawmakers and security officials as an abandonment of America's Kurdish allies governing the region after they lost heavy casualties helping the U.S. drive out ISIS. This prompted Trump to threaten Turkey with sanctions if the country went too far in attacking the Kurdish forces. Ankara views the Kurdish fighters, who were vital in driving ISIS out of Syria alongside American forces, as terrorists and has openly expressed its aim to crush their presence in northern Syria. "The United States will aggressively use economic sanctions to target those who enable, facilitate, and finance these heinous acts in Syria," Trump's statement said Monday. "I am fully prepared to swiftly destroy Turkey's economy if Turkish leaders continue down this dangerous and destructive path."