The three countries are home to the most important companies that produce equipment for manufacturing chips, including ASML, Japan’s Tokyo Electron and the US’s Applied Materials.

US equipment makers have complained that the unilateral action by the Biden administration allowed overseas competitors to continue to operate in one of the biggest markets for their products and undermined the aim of restricting China’s military advancements.

Shares in Tokyo Electron, which has sold chip-making equipment to China, reversed gains and fell about 1 per cent after Bloomberg’s report.

China’s chipmakers dropped too. Shanghai’s Semiconductor Manufacturing International extended declines to as much as 2.1 per cent, while Hua Hong Semiconductor slid as much as 1.5 per cent.

In addition, China’s offshore yuan reversed earlier gains against the US dollar, weakening 0.1 per cent to 6.7448 after the report. The currency had rallied to the strongest level in two weeks on signs of revived tourism and consumption during the Lunar New Year holidays. Thinner trading has also amplified moves in the foreign exchange market with mainland markets shut.

“This sets the next escalating move in the US-China tech war a bit more meaningfully and could weaken yuan sentiment a tad in the near-term,” says Fiona Lim, a foreign-exchange strategist at Malayan Banking Berhad in Singapore.

China has fought back against the US effort. Beijing filed a dispute with the World Trade Organisation in December aimed at overturning the US-imposed export controls.

Even ASML’s chief executive officer has warned that the US campaign could have unintended consequences. On January 25, CEO Peter Wennink said the US-led export control measures against China could eventually push Beijing to successfully develop its own technology in advanced chip-making gear.

“If they cannot get those machines, they will develop them themselves,” he said in an interview with Bloomberg News. “That will take time, but ultimately, they will get there.”

Bloomberg