The recent sell-off in the lira has been fuelled by investor concerns over Erdogan's grip on monetary policy under a new powerful executive presidency and the ongoing row with the United States. The Nasdaq composite was down more than 0.8 percent as technology stocks also dropped.
The currency is down 40 percent just this year, shaking worldwide investors' confidence in the country.
In a tweet, Trump cited the decline in Turkish currency as justification for increasing tariffs to 50 percent on Turkish steel and 20 percent on Turkish aluminum. He tweeted, "Our relations with Turkey are not good at this time!".
Turkey's financial crisis and further USA pressure spurred more concern among investors as fears appeared to spread to American markets. Financial upheaval risks further destabilizing an already volatile region.
He also said it was a pity that Washington chose Brunson over Turkey, its partner in North Atlantic Treaty Organisation, and in an opinion piece published in the New York Times, he warned the U.S. that Ankara had other alternatives as allies.
He did not offer an explanation for the tariff hike, which raises the tariffs to 20 percent on aluminum and 50 percent on steel, though there are a couple of possibilities.
Although Erdogan struck a defiant tone, his foreign ministry called for diplomacy and dialogue to solve problems with Washington and Trade Minister Ruhsar Pekcan said "we implore President Trump to return to the negotiating table".
Trump added that the Turkish currency Lira "slides rapidly downward against our very strong Dollar!" On Friday, he said the country had to take steps in answer "to those who have waged an economic war against us".
The diplomatic spat sent the lira down 16% against the dollar on Friday.
A meeting between senior diplomats from the two countries on Wednesday in Washington did not produce significant progress to ease tensions over the trial of United States pastor Andrew Brunson in Turkey on charges of supporting terrorism and espionage. I am calling on those in America again.
Mr Erdogan said the USA had "repeatedly and consistently failed to understand and respect the Turkish people's concerns". As the lira falls in value, the debt becomes harder to pay. Turkey retaliated with Erdogan ordering authorities to freeze the assets of the USA justice and interior ministers in Turkey - "if there are any".
Cornell University economist Eswar Prasad told the New York Times Friday that Trump's announcement sets "a worrying precedent for future trade sanctions that could be triggered by purely market-driven changes in exchange rates ..."
Ankara blames for an attempted coup in 2016.
The Turks have also restricted American use of the Incirlik Air Base.
In March, the United States imposed extra 25 percent tariff on steel and 10 percent tariff on aluminum imported from a variety of countries, including Turkey.
Marcus Chenevix, Middle East analyst at TS Lombard said that Turkey's economy is fragile.
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