Supreme leader Ayatollah Ali Khamenei sneered at Trump's threats over Iran's nuclear programme after the Middle Eastern power fired a missile last week.
Trump had warned Iran was "on notice" and "playing with fire" but Tehran is continuing its missile drills – firing another weapon on Sunday.
Earlier this week Khamenei struck back after a meeting with his military leaders and promised the nation is planning to respond to mark today's anniversary of the Iran's revolution in 1979.
Since then Trump's adminstration has threatened to blacklist Iran's elite military force the Revolutionary Guard as terrorists as tensions continue to brew.
Ali Akbar Velayati, foreign-affairs adviser the Ayatollahi, said "Washington does not dare carry out its military threats against Iran".
"The Americans know very well that Iran and its allies in the region would retaliate very hard, that will make America face dark days to come," he said.
Hundreds of thousands of Iranians are rallying across the country to celebrate the 38th anniversary of the revolution.
Carrying "Death to America" banners and effigies of Trump, Iranians in Tehran marched towards the Freedom Square. READ MORE