World stock markets fell Friday, particularly in Europe, as investors anxious about the financial stability of Turkey, where the currency has nosedived.
The penalties also bar any USA transactions with the two men.
The lira tumbled 14 percent in one day, to 6.51 per dollar - a massive move for a currency that will make the Turkish poorer and further erode worldwide investors' confidence in the country.
Erdogan has cast the recent slide in the lira as a war and without naming countries said supporters of a failed military coup two years ago, which Ankara says was organized by a US -based Muslim cleric, were attacking Turkey in new ways since his re-election two months ago. He tweeted, "Our relations with Turkey are not good at this time!".
"Emerging market economies move more aggressively; the knee-jerk reaction is stronger". "Hopefully we will overcome this disaster and we will also successfully overcome this economic war", Erdogan said. "The dollar, the mollar, will not cut our path", said Erdogan, using a figure of speech he repeatedly uses to mock something.
Trump last month threatened to slap "large sanctions" on Turkey if it did not release American pastor Andrew Brunson, who faces charges of espionage for allegedly supporting a failed coup attempt in 2016.
Mr. Erdogan on Friday called on Turks to support their struggling currency.
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Turkey's currency has nosedived amid concerns about the country's economic policies and its dispute with the US.
On Friday, before Trump's tweet, Erdogan had tried to stem the sell-off by appealing to Turkish citizens to exchange any dollars, euros or gold for lira to help the currency.
"This is a national, domestic battle".
"Some countries have engaged in behaviour that protects coup plotters and knows no laws or justice", he said. According to a source in Erdogan's office, the two said they were pleased with the positive direction in their economic and trade ties and with the ongoing cooperation in the energy and defense sectors. Shame on you, shame on you. Turkey answered the March tariff announcement by placing its own tariffs on $267 million of US goods.
In an op-ed published in New York Times, Erdogan warned Washington not to risk its relations with Ankara, saying otherwise it would look for "new friends and allies".
Turkey, home to the Incirlik air base which is used by US forces in the Middle East, has been a North Atlantic Treaty Organisation member since the 1950s and a close ally of the United States. It is host to a critical part of the Western alliance's missile defense system again Iran.
And he brushed off the issue of tariffs.
Turkey had alternatives "from Iran, to Russian Federation, to China and some European countries", he added.
"Officials are reportedly preparing stimulus measures in a bid to prop up growth, but these would simply exacerbate Turkey's economic vulnerabilities and could ultimately tip the country into a full-blown crisis, " Capital Economics said in a commentary.