You definitely should not let your puppy continue with that behavior, but it is going to be hard for you. Hard... because basically, you have admitted that it "scares" you. This is too bad, because your puppy can sense your fear. YES... he sure can, and it only reinforces his behavior because realizes he is boss!!!

It is the Terrier bully in him that is driving this behavior. I agree with the pinning him down and holding him by the neck (juggler if you were another dog). Holding him like this until he submits is like telling him, "I could kill you if I wanted". When he submits and lies still he is saying, "OK... I get it, you are the top dog".

Try not to be afraid. Say things like, "NO", "NO" and snatch him up, pinning him down or holding his mouth closed with both hands. If he continues, put him in his crate or pen him off to himself. Keep reinforcing your dominance.

Good luck!!!