Turkey's holding of pastor Andrew Brunson on terror-related charges for almost two years has sparked one of the most intense crises between the NATO allies in years, AFP wrote.
But in his first comments on the dispute since Washington imposed the sanctions on Wednesday, Erdogan also appeared keen to ward off any further escalation by saying that neither side had an interest in a "lose-lose" scenario.
"Today I will give our friends instructions to freeze the assets in Turkey of the American justice and interior ministers, if they have any (such assets)," Erdogan said in a televised speech.
He did not specify to which members of the US administration he was referring. The US attorney general is Jeff Sessions and while the United States does not have an interior ministry similar to Turkey, Secretary of the Interior is Ryan Zinke and Secretary of the Department of Homeland Security is Kirstjen Nielsen.
Erdogan's announcement was a tit-for-tat response to Washington's decision to impose sanctions on Turkish Interior Minister Suleyman Soylu and Justice Minister Abdulhamit Gul.
The sanctions freeze any property or assets on US soil held by the two ministers, and bar US citizens from doing business with them.
Both Turkish ministers have denied having any assets in the US and it is highly unlikely the American officials would have assets in Turkey, making the sanctions largely symbolic.
Erdogan appeared to indicate that he did not want the crisis to escalate further to full-scale economic sanctions.
"We don't want to be a party to lose-lose games. Moving political and judicial disputes into an economic dimension will be harmful for both sides," Erdogan said.
US Secretary of State Mike Pompeo, who discussed the issue with Turkish counterpart Mevlut Cavusoglu on Friday, said he was "hopeful" of progress in the "days and weeks to come".
Erdogan said diplomatic channels were working "very intensely" and added he thought "a significant part of the issues of discord can soon be left behind".
Brunson was moved to house arrest last week following nearly two years in jail on terror-related charges but the change only increased tensions.
President Donald Trump and his Vice President Mike Pence, who shares Brunson's evangelical Christian faith, have made his release and return back to his family in the United States a priority.
"Those who think that they can make Turkey take a step back with threatening language and nonsense sanctions don't know this nation at all," commented Erdogan.