Tech stocks plunge on Wall Street as US-China tensions hit

Shares of semiconductor manufacturers drag down Wall Street, which falls sharply. Companies such as Nvidia, TSMC and Micron have all registered declines of between 2% and 6%while the Dutch ASML suffered a fall of almost 10.82%.

The reaction comes after news that the US government is considering expanding restrictions on the shipment of critical manufacturing equipment to China.

According to a Bloomberg exclusive, the administration of President Joe Biden is considering imposing the foreign direct product rule (FDPR). This rule would allow the United States to impose controls on products manufactured abroad that use American technology, affecting exports from companies such as Japan’s Tokyo Electron and ASML itself. The US is also expected to impose new sanctions on Chinese companies in the sector.

In that context, Nasdaq Composite drops 2.6%, S&P 500 falls 1.2%, Russell 2000 0.7%The only index that rose in the New York market was the Dow Jones Industrial Average, which rose 0.5%.

Wall Street: the context

American companies believe that restrictions on exports to China They are being punished unfairly and have pushed for changes.

Meanwhile, the allies of USA see little reason to alter their shipping policies to China just months before the US presidential election.

Chinese Foreign Ministry spokesman, Lin Jianhas denounced that the United States is “Politicizing trade and the concept of national security“According to him, “relevant countries” should “firmly resist coercion and jointly uphold a fair and open international trade order to protect their own long-term interests.”

This move is not new for the Biden administration, which had already imposed restrictions on the sale of chips and manufacturing equipment to China in 2022 and has been tightening them since then. The United States justifies these measures by security and defense concerns over the possibility of China gaining access to advanced components and manufacturing equipment.

Companies such as Applied Materials have argued in meetings with the US government that these policies are backfiring, hurting American companies more than slowing Chinese progress. They fear that foreign companies such as ASML will stop cooperating with the US because of the growing tension. Japanese government officials have already indicated that they will not impose such measures.

On the other hand, Comments by former President Donald Trump have also had a negative impact on the market.Trump has demanded that Taiwan pay the US for its defence, raising questions about the US commitment to defend Taiwan in the event of a Chinese attack. According to TSMC Chairman Mark Liu, the company’s factories would be rendered inoperative in the event of a military attack on Taiwan.

Finally, ASML has posted results that disappointed the market. Although its second-quarter net sales and profits beat consensus forecasts, net sales fell 9.5% year-on-year and net profit decreased 18.7%, which represents a smaller decline compared to the previous quarter.