Last year, the United States and Saudi Arabia signed an arms deal under which the kingdom would purchase $110 billion in weapons.
Khashoggi, a contributor to The Washington Post, vanished more than a week ago during a visit to the Saudi consulate in Istanbul. Turkish government sources say he was murdered there, a claim Riyadh denies.
Trump said he could not justify sacrificing jobs and income generated by the arms deal.
"That would not be acceptable," Trump said in the Oval Office. "They are spending $110 billion on military equipment and on things that create jobs, like jobs and others for this country."
"They're going to take that money and spend it in Russia or China or someplace else. I think there are other ways. If it turns out to be as bad as it might be, there are certainly other ways of handling the situation."
Trump again expressed concern about Khashoggi's situation.
"We don't like it," he told reporters. "We don't like it even a little bit."
Earlier, he told Fox News: "It is a terrible, terrible precedent. We can't let it happen. And we're being very tough and we have investigators over there."
Khashoggi has criticized Crown Prince Mohammed bin Salman in his writings.
The Post has reported that Prince Mohammed ordered an operation to "lure" the journalist back home -- an operation that may have gone wrong in Istanbul.
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