"you were afraid of them, of humans" is probably the worst thing you can say to Knives. The biggest insult to him, to imply that he is scared of the race that he thinks so lowly of. (Hence the violent kick to the face).
But Vash is right - he sees through Knives. When Knives says in the next panel "get a hold of yourself. Quit being so gullible" - he's saying that Vash can't just blindly trust humans and assume that they won't experiment on them like what they did to Tesla. He's saying that they SHOULD be afraid.









