The escalating trade dispute between the world's two largest economies has fueled worries of further financial volatility and more harm to the global economy after a Sino-US "tit-for-tat" week of tariff threats.

Analysts worried the latest US move－when US President Donald Trump raised the idea of additional possible tariffs on $100 billion worth of China imports－could increase the possibility of wider economic fallout from a potential trade war.

Earlier this week, the US proposed new tariffs on $50 billion of Chinese products, after which China decided to impose tariffs on US imports. Around 34.6 percent of Chinese exports to the US might be affected, if both US proposals become reality. Total exports from China to the US were $433 billion in 2017.

However, beyond tariffs, China has various other potential ways to retaliate, including tougher regulations on US companies operating in China, limits on foreign direct investment from the US, and other investments, as China is the largest foreign holder of US Treasury securities, according to Wendy Chen, an analyst with Nomura Securities.

Large sales of US Treasury bonds, of which China is the largest foreign owner, could lead to a sharp devaluation of the bonds and further hurt the US dollar that could shock the global financial market.

China reduced its holdings of US Treasuries to a seven-month low in January to $1.17 trillion, compared with $1.18 trillion a month earlier, according to the US Treasury Department. Total US Treasuries held by all foreign investors reached $6.26 trillion.

Ha Jiming, a former senior executive with Goldman Sachs Group Inc, said the escalation of trade conflicts between Washington and Beijing could push the US Federal Reserve to accelerate rate hikes in the coming months as US inflation is expected to rise faster, which could bring an end to the bull market in US stock exchanges.

Another important point worth reinforcing is that an escalating Sino-US trade conflict will also affect Asia as a whole, said a research note from Nomura Securities.

As the US accounts for almost one-fifth of China's exports, or the equivalent of 3.6 percent of the country's GDP, large-scale additional tariffs could have a noticeable impact on China's economy and would have knock-on effects for the supply chain across the rest of Asia, said Andrew Fennell, director of the Sovereigns Department in Hong Kong of the global credit rating agency Fitch Ratings.

"The bigger risk, however, is that the US eventually imposes across-the-board tariffs on China," said Fennell. "A more challenging external environment could add to the risk of Chinese policymakers falling back on credit-fuelled stimulus, which would also be a major setback to the deleveraging agenda."

Strong external demand was a key factor behind the outperformance of China's economy last year, which allowed the authorities to focus on addressing financial risks without jeopardizing GDP growth targets, according to the credit rating agency.

However, Guan Tao, former director of the international payment department of the State Administration of Foreign Exchange, said: "As a large open economy, China has a lot of room in terms of policies to prevent external financial risks from international balances of payment."