By Dion Nissenbaum 

WASHINGTON -- The Trump administration warned that it is prepared to impose more penalties on Turkey if it doesn't release an American pastor facing 35 years in prison on disputed espionage charges.

Treasury Secretary Steven Mnuchin said the U.S. was ready to take tougher steps if Turkey doesn't free Andrew Brunson, an U.S. American pastor who has been held for nearly two years on charges of aiding terrorist groups.

"We have more that we're planning to do if they don't release him quickly," Mr. Mnuchin said Thursday during a cabinet meeting with President Trump.

Mr. Trump at the meeting criticized Turkey for holding Mr. Brunson and said America's North Atlantic Treaty Organization ally had "not proven to be a good friend."

After the meeting, Mr. Trump again criticized Turkey on Twitter for taking "advantage of the United States for many years," making it clear that he would make no concessions to secure Mr. Brunson's release.

"They are now holding our wonderful Christian Pastor, who I must now ask to represent our Country as a great patriot hostage," his Twitter post read. "We will pay nothing for the release of an innocent man, but we are cutting back on Turkey!"

Turkey and the U.S. have been embroiled in a deepening feud over Mr. Brunson, stoking a financial crisis with global repercussions. Turkey's currency has plunged to record lows as the country's leaders have sought to reassure investors and stanch the losses.

Turkish President Recep Tayyip Erdogan has rebuffed American demands for the pastor's immediate release and warned the U.S. that it could turn toward Russia if America doesn't back down.

The Trump administration has been working since it took office last year to secure Mr. Brunson's freedom. Repeated efforts to broker a deal have fallen apart, leading the U.S. to impose economic sanctions two weeks ago on two top Turkish officials.

Last week, the U.S. hit Turkey again by announcing plans to double tariffs on steel and aluminum. Turkey responded this week by imposing with heavy new tariffs on American cars, alcohol, tobacco and other U.S. goods.

The Turkish lira began to recover a bit this week as officials in both countries expressed fears that the country's economic instability could trigger a global financial crisis.

On Thursday, U.S. officials said they were waiting to see if the existing pressure would be enough to force Turkey to release Mr. Brunson. But Mr. Mnuchin made it clear that the U.S. is poised to take further punitive steps if the issue isn't resolved quickly.

During the cabinet meeting, Mr. Trump complained that the U.S. had helped secure release of a Turkish citizen from a third country, an apparent reference to his direct appeal last month for Israel to deport a Turkish woman accused of aiding Hamas, the Palestinian militant group.

At Mr. Erdogan's request, Mr. Trump called Israeli Prime Minister Benjamin Netanyahu to secure the Turkish woman's freedom, according to U.S. officials. Trump administration officials thought the move would pave the way for Mr. Brunson's return to the U.S.

"We got somebody out for him," Mr. Trump said. "He needed help getting somebody out of some place. They want to hold our wonderful pastor. Not fair. Not right."

Mr. Brunson was detained in October 2016 as part of a broad domestic crackdown following a failed military coup that July. Mr. Brunson, a North Carolina native who has run a small Protestant church for two decades on Turkey's Aegean coast, was accused of aiding the group accused of plotting the coup and another group of Kurdish separatists battling the Turkish military for more autonomy.

U.S. officials have denounced the trial as a sham. American officials thought Turkey would free Mr. Brunson last month when he appeared for a court hearing. When Mr. Brunson was instead sent back to prison, the U.S. shifted gears and began to put more pressure on Turkey.

Turkey responded by releasing Mr. Brunson to house arrest. But the U.S. still expected Turkey to send Mr. Brunson home.

U.S. officials have been trying to secure release of a Turkish-American NASA scientist also swept up in the 2016 crackdown, and three Turkish citizens who work for the U.S. government in Turkey.

Talks have hit an impasse. Earlier this week, John Bolton, Mr. Trump's national security adviser, told Turkey's ambassador to the U.S. that Mr. Brunson's immediate release was paramount, according to people familiar with the meeting.

Write to Dion Nissenbaum at dion.nissenbaum@wsj.com

(END) Dow Jones Newswires

August 16, 2018 20:39 ET (00:39 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.