Several news outlets recently reported that the White House was looking into limiting investment ties between the world's two largest economies.
The options being considered were thought to include removing Chinese stocks from U.S. exchanges and restricting government pension funds' investments in the Chinese market.
Chinese Foreign Ministry spokesman Greg Shuang told reporters earlier this week that any delisting moves would "harm the interests of Chinese and American companies and people, create turmoil in financial markets, and endanger global trade and economic growth," according to Reuters.
"If these threats were to turn into action, the risk for Europe is that fears of an ever-escalating trade war could drive a further fall in the yuan," Constantine Fraser, European political analyst at the TS Lombard research group, told CNBC via email.
"That means lower demand from China, and from the rest of the world too — and more pain for Europe's heavily export-dependent economy."
Clete Willems, a former high-ranking White House trade official who served as a deputy director of the National Economic Council, told CNBC earlier this week that cutting off the money flow between Washington and Beijing was an idea worth considering.
However, he warned such a move could backfire if not done properly.
Agathe Demarais, global forecasting director at the Economist Intelligence Unit (EIU) told CNBC via email that she expects the U.S. "to move forward with sanctions targeting Chinese companies and banks."
"The extra-territorial component of U.S. sanctions, which means that all companies around the world must stop their business dealings with sanctioned entities if they use the U.S. dollar, means that these moves would sever the ties of these banks with their international counterparts."
"Should international banks fail to sever these ties, they in turn could face fines reaching billions of U.S. dollars," Demarais said.
White House economic advisor Peter Navarro and Senate Majority Leader Mitch McConnell have both dismissed reports of possible U.S. investment curbs against China.
The U.S. Treasury assistant secretary for public affairs also said in a statement over the weekend that "the administration is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time. We welcome investment in the United States."
The reported move was seen by many investors as an effort to gain leverage in the upcoming U.S.-China trade talks.
Washington and Beijing have imposed tariffs on billions of dollars' worth of one another's goods since the start of 2018, battering financial markets and souring business and consumer sentiment.
The ongoing U.S.-China trade war has cast a shadow over global growth prospects, at a time when Europe is seen as close to falling into recession.
TS Lombard's Fraser said it was likely U.S.-led talk about investment curbs against China was "mainly posturing" ahead of ministerial-level trade talks.
"Any moves to delist China would hurt the U.S. too, and with Trump needing a deal at this stage more than the Chinese, a measure of de-escalation is the more likely outcome to the talks," Fraser said.
Top trade negotiators from the U.S. and China will meet in Washington on October 10 in a bid to break the deadlock.