Turkish and Saudi authorities have now been told to launch a "credible investigation" into Mr Khashoggi's disappearance.
Still, he said, the revenue from sales to Saudi Arabia "pales in comparison to the US military".
The political fallout of the disappearance and possible death of Saudi writer Jamal Khashoggi has continued to reverberate around world, casting a cloud on a major investment conference aimed at promoting Saudi Crown Prince Mohammed bin Salman's plans for the kingdom.
A man enters Saudi Arabia's consulate on October 12, 2018 in Istanbul, Turkey. "If the Saudis cut down the oil their country produces by a significant amount, this could cause a lot of tension on the oil markets and cause oil prices to jump very quickly in a very short amount of time, which would harm western economies", he said.
Trump's comments came after a telephone conversation with King Salman, father of the crown prince, the first such talks since the crisis erupted.
A Turkish official and a security source told Reuters on Monday that the authorities have an audio recording indicating that Khashoggi was killed in the consulate, without providing further details.
However, he told CBS News on Saturday that the United States was investigating the case which he called "really awful and disgusting" and that "there will be severe punishment".
"I actually think we'd be punishing ourselves if we did that", Trump told reporters, referring to cancelling the arms deal. He said that Saudi Arabia had made investments in hotels, manufacturing and real estate in the United States and that cutting these would "hurt the USA economy significantly".
Speaking to reporters after a phone call with King Salman, Mr Trump said the Saudi leader had firmly denied knowing what had happened to Mr Khashoggi.
Turkish officials have said Khashoggi was murdered inside the consulate, where he went to get documents for his planned marriage.
Turkish sources allege he was killed by a 15-strong team of Saudi agents but Riyadh insists that he left the consulate unharmed.
In Istanbul, meanwhile, Turkish and Saudi investigators began conducting a joint inspection of the consulate. The president added in a tweet that he is dispatching Secretary of State Mike Pompeo "immediately" to meet with the King in person.
The meeting is on, even though several officials and media companies have pulled out of the conference due to the Khashoggi's disappearance. Tech investor Steve Case and Jamie Dimon, the chief executive of JPMorgan Chase, have said they are no longer going.
Treasury Secretary Steven Mnuchin still plans to attend a previously scheduled Saudi conference this week to address terrorist financing, but those plans could change as the investigation progresses, said White House economic adviser Larry Kudlow.