President Donald Trump would sign an executive order to dissuade Turkey from any further military offensive in northeast Syria, the Department of the Treasury said in a statement.
The order would give the Treasury authority to punish individuals and entities of the Turkish government involved in human rights abuses or actions leading to further deterioration of peace, security and stability in the region, said the statement.
The order would also empower the Treasury to impose secondary sanctions against anyone engaged in "knowing and significant transactions" with designated individuals and entities of the Turkish government.
"We can shut down the Turkish economy if we need to," the Treasury Secretary Steven Mnuchin said in a briefing at the White House.
Secretary of Defense Mark Esper said earlier that he had expressed strong opposition to his Turkish counterpart Hulusi Akar, reiterating that the offensive causes damage to the U.S.-Turkish relationship and risks serious consequences for Turkey.
Turkey launched military operations earlier Wednesday targeting the Kurdish forces in several parts of northeast Syria after the United States decided to pull its troops out of the region.
The decision has prompted unremitting criticism from both parties in Congress, who viewed it as a tacit endorsement of the Turkish offensive against the Kurdish-led Syrian Democratic Forces (SDF), a crucial ally of the U.S.-led coalition in fighting against the Islamic State (IS) in Syria for years.
Turkey, however, regards the SDF as an extension of the Kurdistan Workers' Party, which is listed as a terrorist organization by the country.
Critics are also worried that the Turkish offensive might lead to a resurgence of the IS and a humanitarian crisis in the region.
Republican Senator Lindsey Graham and Democratic Senator Chris Van Hollen on Wednesday announced a framework for sanctions against Turkey, including sanctions on senior Turkish government officials and prohibition of all U.S. military and business transactions with Turkey.
Facing condemnation and pressure at home, the Trump administration has gradually recalibrated its position regarding the evolving situation in Syria. Trump said on Thursday that he hopes to mediate between Turkey and the Syrian Kurds, while also threatening to punish Turkey if its offensive in northeast Syria goes beyond limits.
"Turkey knows where I stand ... We are going to possibly do something very, very tough with respect to sanctions and other financial things," Trump said.
A senior state department official echoed Trump's warning in a teleconference briefing on the same day, saying that the United States is willing to impose significant costs if "Turkey acts in a way that is disproportionate, inhumane, or otherwise goes beyond the lines that the president has in his own mind."
U.S. media reported that several senior U.S. diplomats believed Trump made a crucial error by not threatening sanctions ahead of the troop withdrawal.
Turkish Foreign Minister Mevlut Cavusoglu said Thursday that Turkey would retaliate if the United States followed through with sanctions against Turkey.