Following the announcement, the lira firmed briefly to 5.8699 from 6.04 to the US dollar, but later eased back to 6.0200 at 1538 GMT.
The currency has lost almost 40 percent against the dollar this year, driven by worries over Erdogan's growing influence on the economy and his repeated calls for lower interest rates despite high inflation.
Investors, already anxious about Turkey's economy, were irked by a diplomatic and trade dispute with the United States over the continued detention of an American pastor Andrew Brunson on espionage and terror-related charges.
Mr Trump described him as "our wonderful Christian Pastor, who I must now ask to represent our Country as a great patriot hostage".
The Turkish newspaper Hurriyet reported on Wednesday that the Turkish government published a decree that morning imposing tariffs on American "rice, tobacco products, vehicles, alcohol, coal, and cosmetics".
Erdogan signed a decree on August 15 that raises tariffs on American cars to 120 percent, on alcoholic drinks to 140 percent, and on leaf tobacco to 60 percent.
Turkey is beset by a weak currency and tension with the United States
Finance Minister Berat Albayrak, the son-in-law of President Recep Tayyip Erdogan, addressed hundreds of foreign investors from the United States, Europe and Asia via a conference call in a bid to soothe the markets.
"Turkey is both more exposed and less able to do something about it than any other country", says Brad McMillan, chief investment officer for Commonwealth Financial Network. The Turkish central bank tightened some rules around currency exchange.
For years Turkish firms have borrowed in dollars and lira to take advantage of lower interest rates.
He also recalled that Pakistan's next prime minister Imran Khan supported Turkey in the recent crisis with the U.S.
"Qatar has pledged $15 billion of direct investments in Turkey", presidential spokesman Ibrahim Kalin wrote on Twitter. But she added: "Turkey's economic problems - those are a part of a long-term trend, something of its own making and not the result of any actions the United States has taken".
Turkish President Recep Tayyip Erdogan has accused the USA of trying to "bring Turkey to its knees".
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