US equity markets have given back early gains following a report from The Wall Street Journal that a U.S. official told top global semiconductor makers he wanted to revoke waivers they have used to access American technology in China, people familiar with the matter said, a move that could inflame trade tensions.

Currently, South Korea's Samsung Electronics and SK Hynix as well as Taiwan Semiconductor Manufacturing enjoy blanket waivers that allow them to ship American chip-making equipment to their factories in China without applying for a separate license each time.

Jeffrey Kessler, head of the unit in charge of export controls at the Commerce Department, told the three companies this week he wanted to cancel those waivers, according to people familiar with the meetings. They said Kessler described the action as part of the Trump administration's crackdown on critical U.S. technology going to China.

The action isn't a new trade escalation but would be designed to make the licensing system for chip equipment similar to what China has in place for rare-earth materials, White House officials said.

The U.S. and China continue to make progress on completing the agreement they reached in London and negotiating on trade, they said.

"Chip makers will still be able to operate in China. The new enforcement mechanisms on chips mirror licensing requirements that apply to other semiconductor companies that export to China and ensure the United States has an equal and reciprocal process," a Commerce Department spokesman said.

For now, the market is selling first, thinking later.

The reaction was swift with MegaCap tech being hit hardest...

...obviously semi stocks suffering even more...

...dragging Nasdaq into the red from Wednesday's close...

A new step making it harder for global chip makers to operate in China might still strike Beijing as a betrayal of the London deal.

Finally, WSJ reports that the South Korean and Taiwanese companies have notified authorities in their home regions about the waiver issue, hoping for help lobbying against the move, people familiar with the discussions said.

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