Turkey on Friday warned a move announced by US President Donald Trump to double steel and aluminium tariffs on the country would harm ties, vowing retaliation against a measure it said was against WTO rules.
Despite Trump's insistence, Turkey has not budged in freeing American pastor Andrew Brunson, who has been detained by Turkey for nearly two years on charges that he was working with a terrorist organization and was a spy.
It added that Trump's comments, made on Twitter, were "not possible to reconcile with state seriousness".
Trump's action on Friday indicates he is willing to use his presidential powers as an economic and diplomatic weapon, even against allies, the Wall Street Journal reported.
A White House spokesman, Lindsay Walters, said Friday that the president had authorized the increase in tariffs based on a threat to national security.
Walters did not offer any explanation as to how U.S. national security is threatened by steel and aluminum imports from Turkey, which hosts a major USA military base.
The sides held talks in Washington this week but failed to resolve the spat, and Trump took advantage of Turkey's turmoil on Friday to turn the screws on the country.
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.
The steel and aluminum tariffs originally had nothing to do with the treatment of Brunson.
Erdogan said during an address to supporters: "Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks.
President Recep Tayyip Erdogan says his government "will not lose the economic war".
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Erdogan framed Turkey's currency crisis as a "national battle" against economic enemies, namely the USA, saying "if they have their dollar, we have the people, we have Allah". The entire Turkish public is against USA policies that disregard Turkey's legitimate security demands.
The additional United States tariffs on steel imports from Turkey announced on August 10 will take effect today (August 13), said a report.
But President Erdogan brushed off any concerns during a speech in the northeastern city of Bayburt on Friday, saying: 'The dollar can not block our path.
"Nevertheless, we implore President Trump to return to the negotiating table - this can and should be resolved through dialogue and cooperation".
"Some countries have engaged in behaviour that protects coup plotters and knows no laws or justice", he said.
He appeared to blame foreigners for trying to hurt Turkey, saying: "This will be my people's response against those waging an economic war against us".
"He is using tariffs as a threat to get what he wants politically or economically", she said, adding "the message he sends is that he can not be trusted".
Berat Albayrak, Turkey's treasury and finance minister, sought at a news conference Friday in Istanbul to ease investor concerns about Turkey's econom.
The euro sagged to a 13-month low against the dollar on concerns that European banks operating in Turkey could suffer losses.
Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency. It said the United States remained an important trade partner.
"The last time I can remember a currency exploding into a similar acceleration of weakness to what we have seen in the past 24 hours is the Russian ruble crisis that transpired late in 2014", Jameel Ahmad, the head of currency strategy at FXTM, said.