A higher Turkish court has rejected an appeal for the release from detention of the American pastor Andrew Brunson, who is facing terrorism-related charges and is now under house arrest in the Aegean province of Izmir.
Deepening a spat that has rattled financial markets and threated to split a long-standing defense and political alliance, Treasury Secretary Steven Mnuchin suggested the next spiral of tit-for-tat sanctions was coming soon. Erdogan previously suggested a swap in which Brunson is released in exchange for Gulen, though USA officials have said Turkey must present convincing evidence for any extradition proceeding to be considered.
Dashing hopes for a quick solution to the dispute, a Turkish court on Friday rejected an appeal for the evangelical pastor's release from house detention.
Andrew Brunson, a 50-year-old Christian pastor, was detained two years ago in Turkey on spying charges, and faces up to 35 years in prison if found guilty.
Turkey has repeatedly criticized the US for not condemning the coup attempt two years ago.
Turkish officials visited Washington last week with the idea of seeking leniency for a United States investigation into a Turkish bank, which a source told the Eye fell through, but opened a dialogue. Trump added the pastor is a "very innocent man" and "we got somebody out for him - he needed help getting somebody out of some place".
While Evangelists in the United States consider Trump's efforts to release Brunson as support for religious freedom, the article argued Trump was trying to use this issue to secure success during the November 7 midterm elections.
Turkey's currency, which had recovered from record losses against the dollar earlier in the week, was down about 5% against the dollar on Friday. It estimates Turkey's short-term external debt at $180 billion and total external debt at $460 billion - the highest in emerging markets.
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Last week, Trump announced on Twitter that he had green-lit a doubling of steel and aluminum tariffs on Turkey, and warned that U.S. relations with Turkey "are not good at this time!"
Analysts say a sharp hike in interest rates is needed to stop the declining value of lira, but Ankara is opposed to any rate hike which would likely undercut growth.
On Wednesday, in retaliation, Turkey increased tariffs on several US -origin products, including alcohol and tobacco products and cars.
Analysts say Turkey is also likely to seek a more dynamic economic relationship with China and Russian Federation, with whom ties have warmed considerably in recent years.
Turkish diplomats are reportedly close to releasing a USA pastor at the center of a diplomatic spat between Turkey and the US.
A Trump administration official said on Thursday evening that the White House has told Turkey to free the pastor if it wants to cool off diplomatic and economic tensions between the two nations. "They can't take our people".