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Investing.com -- Major averages, including the S&P 500, faced a downturn on Friday, falling 1% in response to reports of the US planning to expand technology sanctions against China. The proposed measures aim to target subsidiaries of Chinese companies currently under US restrictions, signaling an escalation in the ongoing tensions between the two economic powerhouses.

The sell-off in the markets was primarily driven by news from Bloomberg indicating that the Trump administration is considering new regulations that would require US government licensing for transactions with entities that are majority-owned by firms already on the US sanctions list. This move is intended to close loopholes that have allowed Chinese companies to circumvent existing sanctions by establishing new subsidiaries.

The potential for increased regulatory scrutiny and sanctions has raised concerns about the impact on global tech and semiconductor industries, which are deeply interconnected with Chinese firms. Some of China’s largest tech entities, such as Huawei Technologies Co. and Yangtze Memory Technologies Co., are already facing restrictions under the US Entity List, and the new policy would further tighten these controls.

While the White House and Commerce Department have not yet commented on the matter, the proposed subsidiary rule could be announced as early as June. The rule would apply a 50% ownership threshold in relation to companies on the Entity List, Military End-User list, and Specially Designated Nationals list. However, details and timing are subject to change as the policy and related sanctions are not finalized.

The market’s negative reaction reflects investor apprehension about the broader implications of heightened US-China tech tensions. The ongoing dispute has previously resulted in supply chain disruptions and has the potential to affect a wide range of industries reliant on technology and semiconductors.

This content was originally published on http://Investing.com