US stocks have fallen further after Donald Trump imposed a new trade restriction on the chip designer Nvidia, rattling investors and triggering a sell-off across the semiconductor industry.
The S&P 500 index dropped by about 1.3% in early trading, with the tech-heavy Nasdaq index down 2.1%. The Dow Jones fell 0.6%.
Nvidia, the Californian company at the heart of the revolution in artificial intelligence technology, lost billions of dollars from its market value at the opening bell, with its shares down 7.4%.
The sell-off, which has spread to semiconductor makers in Asia and Europe, comes after Nvidia said the Trump administration had restricted the sale of its H20 chip in China by means of new licence requirements.
The company now expects to report a $5.5bn (£34.1bn) hit in its financial quarter that ends on 27 April, covering the cost of licences for its stock of the chips and associated sales commitments.
The US restriction will also hit the MI308 processor made by rival chip business Advanced Micro Devices (AMD). Its shares dropped 6.5% as it expects to take a charge of as much as $800m (£604m) because of the new rule.
In Asia, South Korean semiconductor businesses such as Samsung Electronics and SK Hynix fell by about 4% overnight, and the Taiwan Semiconductor Manufacturing Company (TSMC) dropped 2.5%.
Meanwhile in Europe, shares in semiconductor tech firm ASML fell 5.2% as its chief executive, Christophe Fouquet, said tariffs had “increased uncertainty in the macro environment”. The Dutch company, which produces lithography machines used to make chips, also reported orders of €3.94bn (£3.37bn) in its first financial quarter, about €1bn less than investors had expected.
So far the chip industry has been exempt from the 10% tariffs imposed by the US since 2 April. The US government has historically built up regulations to limit Chinese access to advanced chips – including under Joe Biden as it raced for supremacy in AI. But the Trump administration has been paving the way for more levies on the sector.
Global stocks were also hit by a warning from the World Trade Organization. It said Trump’s tariffs will send international trade into reverse this year and depress global economic growth. While the WTO had previously expected goods trade to expand by 2.7% this year, it now forecasts a 0.2% decline.
There were some more positive indicators across the market, with a 1.4% rise in US retail sales in March being higher than expected. It compared with a 0.2% gain in February, according to the US Census Bureau, though this could suggest consumers were snapping up goods before the implementation of tariffs.
Oil prices also rose on Wednesday amid hopes of trade talks between China and the US, and following a report that Iraq plans to cut oil production in April. Brent crude rose by 84 cents, or 1.3%, to $65.49 a barrel, while US crude rose by a similar amount to $62.12 a barrel.
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If there are trade talks with China, they will involve the country’s new international trade negotiator. Beijing unexpectedly announced on Wednesday that Li Chenggang will take over the role from the veteran trade tsar Wang Shouwen. No reason was given for the change, although it came amid a broader reshuffle in Chinese government.
In the US, California has launched a legal challenge to Trump’s tariffs, accusing the president of overstepping his authority and threatening trade in the state. The lawsuit was brought by California’s governor, Gavin Newsom, and its attorney general, Rob Bonta.
Also on Wednesday, Trump posted on his social media platform Truth Social that he would attend a trade meeting with Japanese officials and his cabinet secretaries.
“Japan is coming in today to negotiate Tariffs, the cost of military support, and “TRADE FAIRNESS,” he wrote. “I will attend the meeting, along with Treasury & Commerce Secretaries. Hopefully something can be worked out which is good (GREAT!) for Japan and the USA!”
Japan was hit with a 24% tariff rate on its exports to the US, though, like most of Trump’s “reciprocal” tariffs, this was paused for 90 days last week. However, a 10% universal rate remains in place, as well as a 25% duty on the sale of Japanese cars to Americans.
