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Mr Lamy urged the bloc to prepare for its companies to be targeted by American sanctions with the ongoing dispute between the two superpowers showing no sign of resolution.
As they weigh up a response to renewed US sanctions against Iran, which have forced an exodus of European companies from the Middle Eastern country, EU governments should consider the prospect of similar extraterritorial measures penalising China trade, Mr Lamy told an international investment conference in Paris.
He said: "If the US were to step further in not only hitting China with trade measures but with sanctions, if they were to deal with China the way they did with Iran, then we would all have a big problem.
"That's why we need to have a careful look at what will happen in the case of Iran."
A surge in global protectionism from Brexit to the US-China trade war has done little to dent foreign direct investment flows overall, according to data presented to the XBMA conference on cross-border mergers and acquisitions.
The global volume of M&A deals is projected to rise 26 percent this year to $4.34 trillion.
This is its second-highest annual total since 2007, the eve of the last major financial crisis.
Chinese investors accounted for a record 20 percent of European inbound deal volume last year as some turned their attention away from the United States.
Europe-China trade is also expected to benefit from increased US-China tariffs and other barriers. [...]
Related: Joint Communiqué of the Ottawa Ministerial on WTO Reform