Foreign Ministry spokesman Lu Kang said Beijing opposed countries imposing unilateral sanctions on Chinese companies and would take action.
The Trump administration on Wednesday effectively blocked Huawei products from being used in US networks.
The order does not name any company, but is believed to target Huawei.
Huawei denies its products pose a security threat and says it is ready to engage with the US.
Beijing accused President Trump of engaging in industrial sabotage by using state security as “as a pretext for suppressing foreign business”.
“We urge the US to stop this practice and instead create better conditions for business co-operation,” Mr Lu said. He did not give any details over how China planned to retaliate.
The confrontation over Huawei comes amid a broader trade war between the US and China, with both sides imposing aggressive tariffs on imports.
Writing in the Evening Standard on Wednesday, Liu Xiaoming, China’s ambassador to the UK, said China did not want a trade war but was “not afraid of one and would fight one if necessary”.
“China is always open for talks but it would fight to the end should a ‘trade war’ break out,” he wrote.
What did the US sanctions order say?
According to a White House statement, Mr Trump’s order aims to “protect America from foreign adversaries who are actively and increasingly creating and exploiting vulnerabilities in information and communications technology infrastructure and services”.
It gives the secretary of commerce the power to “prohibit transactions posing an unacceptable risk to the national security”, the statement adds.
The move was instantly welcomed by Federal Communications Commission Chairman Ajit Pai, who called it “a significant step toward securing America’s networks”.
The US had already restricted federal agencies from using Huawei products and has encouraged allies to shun them, while Australia and New Zealand have both blocked the use of Huawei gear in 5G networks.
In April 2018 another Chinese tech company, ZTE, was barred from buying US parts after it was placed on the same “entity list”. It resumed business after reaching a deal with the US in July.
How did Huawei respond?
Huawei has said its work does not pose any threats and that it is independent from the Chinese government.
“Restricting Huawei from doing business in the US will not make the US more secure or stronger,” the company said in a statement.
“Instead, this will only serve to limit the US to inferior yet more expensive alternatives, leaving the US lagging behind in 5G deployment, and eventually harming the interests of US companies and consumers.”
The company also said “unreasonable restrictions” on Huawei raised “other serious legal issues”.
During a meeting in London on Tuesday, Huawei said it was “willing to sign no-spy agreements with governments” as concerns over the security of its products used in mobile networks continued to grow.
A new ‘red scare’?
Trump’s executive order is designed to protect national security, and there is no doubt that Chinese technology can seem formidable. The Chinese use aggressive surveillance tools in their country and Trump has reason to be concerned.
Some analysts say the president’s order has gone too far, though. They point out that one significant breach – the Chinese recruitment of a former CIA officer, Kevin Mallory – was done through low-tech means: LinkedIn, a social media site.
Mallory was convicted of spying, and he faces up to life in prison (he will be sentenced on Friday). These analysts say the threat from China is real, but that global telecommunications are nearly impossible to control and the best defence against espionage is not an executive order but old-fashioned vigilance among those who use computers and other technology.
How have other countries responded?
UK Prime Minister Theresa May last month provisionally approved Huawei technology for use in the nation’s future 5G telecoms networks, but a leaked account of the meeting said five cabinet ministers raised concerns about the move.
France, Germany and Belgium have not banned Huawei technology, but Japan has from public contracts.
The US has pressured allies to shun Huawei in their next generation 5G mobile networks.
The US has raised tariffs to 25% on $200 billion of Chinese imports and is threatening to tax an additional $300 billion worth.
Stock markets have been hit by the row but have steadied in recent days amid hopes the two countries might hold talks.