The row marks another low point in relations between Turkey and Europe, further dimming Ankara's prospects of joining the bloc. It also comes as Turkey is caught up by security concerns over militant attacks and the war in neighbouring Syria.
A source close to the government told Reuters that sanctions were expected to be discussed when the cabinet of ministers meets at 7 pm (1600 GMT). Ankara's minister for EU Affairs, Omer Celik, said sanctions were likely.
"We will surely have sanctions against the latest actions by the Netherlands. We will answer them with these," Mr Celik said.
Apart from any economic measures, a source in Ankara said sanctions could affect cultural activities, and military and technological cooperation.
Turkey summoned the Dutch charge d'affaires on Monday to complain about the ban - imposed due to fears of unrest and distaste at what the Netherlands sees as an increasingly authoritarian tone from Mr Erdogan - and the actions of Rotterdam police against Turkish protesters over the weekend, foreign ministry sources said.
On Sunday, Dutch police used dogs and water cannon to disperse hundreds of protesters waving Turkish flags outside the consulate in Rotterdam. Some protesters threw bottles and stones and several demonstrators were beaten by police with batons, a Reuters witness said. Mounted police officers charged the crowd.
"The Turkish community and our citizens were subject to bad treatment, with inhumane and humiliating methods used in disproportionate intervention against people exercising their right to peaceful assembly," a statement attributed to ministry sources said.
The Dutch government barred Turkish Foreign Minister Mevlut Cavusoglu from flying to Rotterdam on Saturday and later stopped Family Minister Fatma Betul Sayan Kaya from entering the Turkish consulate there, before escorting her back to Germany.
Protests then erupted in Turkey and the Netherlands. Several European countries, including Holland, have stopped Turkish politicians holding rallies, due to fears that tensions in Turkey might spill over into their expatriate communities.
Some 400,000 Turkish citizens live in the Netherlands and an estimated 1.5 million Turks live in Germany.
The Dutch government said the visits were undesirable and it would not cooperate in their campaigning. According to polls, it is set to lose about half its seats in elections this week as the anti-Islam party of Geert Wilders makes strong gains.
Monday was the third time the Dutch envoy had been called in since Saturday over the row. The Dutch ambassador is on leave and the Turkish foreign ministry says it does not want him back "for some time".
Ozgur Altug, chief economist at BGC Partners in Istanbul, said at this stage he did not foresee the row having serious short-term economic consequences.
"However, if the tension escalates and if countries start imposing sanctions against each other, it might have serious implications for the Turkish economy," he said.
Turkish exports to the Netherlands totalled $3.6 billion in 2016, making it the tenth largest market for Turkish goods, according to the Turkish Statistical Institute. Turkey imported $3 billion worth of Dutch goods in 2016.
Dutch visitors are important to Turkey's tourism industry, which was hit hard in 2016 by security fears due to attacks by ISIS and Kurdish militants. Some 900,000 Dutch people visited Turkey last year, down from 1.2 million a year earlier.
A source close to the government told Reuters that sanctions, if imposed, may go beyond the economy.
"When the sanctions are imposed, what we need to be careful about is being realistic. We are not completely closing the windows," the source said. "However, we want to show that what has been done to Turkey will have a response."
He said certain cultural activities may be cancelled and the re-evaluation of military and technological cooperation was also on the table.
Ankara is seeking an official written apology for the treatment of its family minister and diplomats in Rotterdam, the Turkish foreign ministry sources also said.
Dutch Prime Minister Mark Rutte has said it is Mr Erdogan who should apologise for comparing the Netherlands to fascists and Nazis, adding that Turkey was acting "in a totally unacceptable, irresponsible manner".
NATO Secretary-General Jens Stoltenberg called on Turkey and the Netherlands to defuse the row.
At the weekend, Mr Erdogan dubbed the Netherlands "Nazi remnants" and said "Nazism is still widespread in the West", comments echoed in Turkish media on Monday.
"Nazi Dogs," said a front-page headline incorporating a swastika in the pro-government Aksam newspaper, above a photo of a police dog biting the thigh of a man during Saturday night's protest in Rotterdam.