Personally, I would not make a correction if he's showing nervousness to something. That will only make him think the 'bad thing' hurts him. It's normal for them to go through fear stages when they are young, I usually try not to make a big deal of it. Give him more space from it if he's nervous and reward when he shows signs of relaxing.
I think the best thing is to reward with a treat, if he likes them, particularly if you are working at keeping him from getting amped up. I would think the tug would get him more revved up.
That is a good looking pup you have!