Fears of a trade war between the US and China weigh on the share prices of Microsoft and Apple

ADVERTISING

The trade war between China and the United States over artificial intelligence could escalate amid speculation that Washington is considering restricting the export and sale of key semiconductor chips.

According to Bloomberg, this follows an unconfirmed report that President Joe Biden is considering further restricting the sale of critical chipmaking equipment to China through a sweeping rule called the Foreign Direct Product Rule.

This may be true even if the product is manufactured abroad, contains no U.S. components, and is sold to third-party buyers without ever entering the U.S. Therefore, the U.S. government can claim that these technologies are subject to the Export Administration Regulations (EAR).

This news has hit the shares of several major technology companies, including Microsoft, whose share price fell 1.32% to $443.55 on Wednesday. Apple also lost 2.53% to $228.88 on Wednesday and Nvidia plunged 6.62% to $117.99.

It is estimated that the world’s largest companies have lost over $338 billion in value due to fears of a trade war.

What led to the trade war between China and the US in the field of artificial intelligence?

Recently, the US revoked export licenses of companies such as Intel and Qualcomm in an effort to limit China’s access to artificial intelligence equipment and technology that could potentially be used for military purposes.

Similarly, the US has banned American suppliers from selling and exporting semiconductors and telecommunications equipment to Huawei.

Dan Coatsworth, investment analyst at AJ Bell, said: “The threat of greater US government intervention in the semiconductor sector has rocked the market, sending chip stocks down six points and destabilising the Nasdaq. Investors are used to nonstop good news from technology stocks, so the slightest bit of negative news has caught people off guard and caused panic in the markets.

“The U.S. government already has controls in place to prevent China from accessing advanced technologies that could benefit its military capabilities. Some parties argue that these controls have been ineffective because China has simply acquired the technology elsewhere. So there are rumors that the Biden administration wants to crack down with tighter restrictions.

“The prospect of Donald Trump returning to the White House also carries the risk that he could crack down even harder to prevent China from getting foreign technology. Trump could look at the supply chains of U.S. semiconductor companies and encourage them to stop relying on foreign equipment.”

China continues to be under considerable pressure from EU tariffs

Aside from potentially escalating tensions with the US, China is also facing tariffs on its electric car exports to the EU, due to the EU’s suspicion that Chinese electric car manufacturers such as BYD, Geely and SAIC are subsidised by the Chinese government in order to be able to sell their cars in the EU at lower prices.

However, German car manufacturers such as BMW, Mercedes-Benz and Audi are criticising the EU’s reaction. They believe it could lead to China imposing retaliatory tariffs on their extensive production facilities in China. This in turn could lead to them losing access to cheap land, capital and tax breaks, among other things.

China has also announced that it will impose tariffs on imports of EU goods such as dairy products, pork and luxury items.