Quran endorses the statement of Prophet(ﷺ) in Surah Anfal verse 12. The context here is enemies of Islam. Those who are hostile towards Muslims.
(Remember) when your Lord revealed to the angels, "Verily, I am with
you, so keep firm those who have believed. I will cast terror into the
hearts of those who have disbelieved, so strike them over the necks,
and smite over all their fingers and toes." Quran 8:12
Now read this:
Allâh does not forbid you to deal justly and kindly with those who
fought not against you on account of religion nor drove you out of
your homes. Verily, Allâh loves those who deal with equity. It is only
as regards those who fought against you on account of religion, and
have driven you out of your homes, and helped to drive you out, that
Allâh forbids you to befriend them. And whosoever will befriend them,
then such are the Zâlimûn (wrong-doers - those who disobey Allâh).
Where do we draw the line?
We draw line where the companions of the Prophet(ﷺ) drew. We understand and implement the way they implemented.
Al-Awza’i said: “Patiently restrict yourself upon the sunnah, stop
where the people (ie the companions) stopped, say what they say and
refrain from that which they refrained. Traverse upon the path of your
Salaf al-Salih, for indeed what was sufficient for them is sufficient
for you.” (Al-Shari’ah of al Ajurri, pg58)