Turkish currency has lost about 40 percent of its value in the past year.
Relations between the two North Atlantic Treaty Organisation allies have sunk to their lowest point in decades over a number of issues including the detention of United States pastor Andrew Brunson on terror-related charges, prompting the Turkish lira to hit record lows against the dollar.
As the currency continued to fall, United States President Donald Trump announced on Friday he had doubled steel and aluminum tariffs on his North Atlantic Treaty Organisation ally before admitting that relations between Washington and Ankara were "not very good". At the same time, it has continued the deterioration of Turkey's relations with its partners and allies, foremost the United States.
Turkey remains at loggerheads with the United States in one of the worst spats between the two North Atlantic Treaty Organisation allies in years over the detention for the last two years of American pastor Andrew Brunson and a host of other issues.
Last week, a Turkish delegation went to Washington and met American counterparts but there was no breakthrough.
Waves from the crisis spread overseas, with investors selling off shares in European banks with large exposure to the Turkish economy.
Erdogan, whose typical defiance in the face of the crisis has further unnerved investors, appealed to Turks' patriotism and urged support for their free-falling currency. "It is a national fight", Erdogan said.
Erdoğan attempted to downplay economic concerns by telling Turks "not to worry", telling supporters they were in an "economic war" and to convert their dollars and "gold under the pillow" into lira. "This will be the response to those who have declared an economic war".
That is unlikely to mollify investors who are also anxious by the growing dispute with the United States.
"They tell us to release the priest by Wednesday 6:00 pm, otherwise the sanctions will begin", Erdogan added. It is obvious how it will be done: "since the final decision-maker of all policies in the new regime is the president, the responsibility of regaining confidence is on his shoulders".
"We have seen your play and we challenge you", he added, referring to the fluctuation of the Turkish Lira against the dollar. Hard currency debt issued by Turkish banks suffered similar falls.
New Finance Minister Berat Albayrak - Erdogan's son-in-law - acknowledged that the central bank's independence was critical for the economy, promising stronger budget discipline and a priority on structural reforms.
Presenting the government's new economic model, he said the next steps of rebalancing would entail lowering the current account deficit and improving trust. But, he wrote, more recent disputes over a failed 2016 coup, the conflict in Syria and sanctions imposed against top Turkish officials and the country's steel industry were straining that alliance to its breaking point. "Albayrak's plan was uninspiring at best".
Turkish President Tayyip Erdogan addresses businessmen in Trabzon, Turkey August 12, 2018.