China warned the U.S. of retaliation on Thursday (November 28) as legislation that supports Hong Kong's protesters became law.
U.S. President Trump signed the bills on Wednesday (November 27).
Hong Kong will now have to regularly prove it has enough autonomy from China - to keep its special status with the U.S..
That means it could risk losing the favorable trading terms that have allowed it to become a global financial hub.
It also threatens sanctions for human rights violations in the city.
It's been a rocky week for U.S. relations with China, just as the two sides seek a deal to end a damaging trade war.
On Tuesday (November 26) Trump said the U.S. wants to see democracy in the Chinese-ruled city, that's one of the core demands of the current protest movement.
China's reaction on Thursday has been damning.
It said American interference in Hong Kong was doomed to fail.
And that the U.S. will shoulder the consequences of China's counter measures.
Hong Kong's government meanwhile - which is backed by Beijing - said the U.S. move sent the wrong signal to demonstrators, who for six months have been staging fiery anti-government protests.
This all comes as Hong Kong itself is enjoying a rare lull in violence.
A two-week siege at one of the city's universities seems to have come to an end.
Police entered the grounds on Thursday to collect evidence, and remove dangerous items from the campus.