Mr Palmer told the Federal Court in Sydney on Wednesday he "didn't know what the limits would be" after the government passed legislation relating to his Balmoral South iron ore project.
The businessman said he was "scared" because provisions in the law protected the government from criminal prosecution.
His look at the legislation indicated "they could really do anything to me".
Referring to the fictional character James Bond and his "licence to kill", Mr Palmer told the court: "I didn't know what the limits might be."
"I was just scared because I didn't expect governments ever to produce legislation like that in Australia so it really told me that you'd better take these people seriously, they could do anything."
Asked by Justice Michael Lee whether he had a "genuine fear" for his physical safety, Mr Palmer said it was not just for himself, but his employees in WA.
The businessman also told the court he funded stockpiles of anti-malaria drug hydroxychloroquine for the federal government on the basis it looked like a "promising treatment" for COVID-19.
One of Mr Palmer's complaints relates to Mr McGowan saying the businessman "wanted to come to Western Australia to promote hydroxychloroquine to the people of the state as some sort of cure for COVID".
The premier said he was pleased police rejected Mr Palmer's application to enter WA because he didn't think Mr Palmer promoting a "dangerous drug" was good for the state.
But Mr Palmer told the court he wasn't promoting anything, but instead responded to what the government wanted him to do.
He said he was concerned about the comments because it was suggesting he was "equivalent to a drug dealer" or someone who would disregard the law.
Mr Palmer told the court he was concerned about his personal safety after being shown a website where people were encouraged to spit on him or attack his family and a video showing people at nightclubs singing about wanting to kill him.
He thought it was "better to lie low" although it was very hard to stay controlled when there was "this level of violence" against him, he told the court.
Asked about Mr McGowan saying he was "at war" with Mr Palmer, the billionaire said he was "amazed".
"I didn't think that West Australia had the power to declare war on anyone let alone on a citizen," he added.
He said Mr McGowan's comments which included calling the businessman the "enemy of the state" left him unable to sleep at night and "very, very upset".
Mr Palmer is suing Mr McGowan claiming public comments made in July 2020 had damaged the Queensland businessman's reputation.
The premier has lodged a counter-claim that the billionaire defamed him in several interviews.
The comments by both men were made in mid-2020 around the time Mr Palmer and his company Mineralogy started High Court proceedings against WA to have the state's hard border declared unconstitutional.
Further background to the case includes claims relating to the circumstances surrounding WA legislation which prevented Mr Palmer and Mineralogy from suing the state for billions of dollars over the Balmoral South iron ore project.
After Mr Palmer's evidence the court will adjourn until February 26 so Mr McGowan can testify without missing parliamentary sittings while self-isolating for seven days on return to WA.
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