China country-specific exchange traded funds, notably, those that track offshore Chinese company stocks, plunged Friday after the Trump administration recommended U.S.-listed Chinese companies to comply with new audit requirements.

On Friday, the iShares MSCI China ETF (NASDAQ: MCHI), the largest China ETF by assets, declined 4.0% while the Xtrackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), the largest China A-shares related ETF, decreased 2.7%.

In the latest escalation between the U.S. and China, Chinese companies that sell shares in U.S. markets will be required to provide financial audits and those that don’t comply will delist from major U.S. exchanges within three years, the Wall Street Journal reports. Under the plan, Chinese firms with shares listed on the New York Stock Exchange and Nasdaq Stock Market would have to comply by 2022 or give up listings on the exchanges.

To remain on the exchanges, Chinese auditors would have to share work papers with the Public Company Accounting Oversight Board, a specialized audit regulator overseen by the U.S. government.

Additionally, Chinese companies seeking to go public in the U.S. would also have to comply with the new audits before they can be listed on the NYSE or Nasdaq, but they have until 2022 to follow the rules.

The latest recommendations out of the Trump administration are intended to protect American investors from what the White House described as risks posed by Chinese companies.

“The recommendations outlined in the report will increase investor protection and level the playing field for all companies listed on U.S. exchanges,” Treasury Secretary Steven Mnuchin, who heads the President’s Working Group on Financial Markets, said.

The stock proposal also follows a number of steps to put pressure on Beijing. On late Thursday, President Donald Trump revealed sweeping bans on U.S. transactions with Chinese owners of messaging app WeChat and video-sharing app TikTok.

The stock rule also came after concerns that have extended for years but only gained political traction in the recent escalating tensions between the U.S. and China. For instance, significant accounting frauds involving Chinese companies have exposed the gap in U.S. audit oversight, notably Luckin Coffee Inc., which said employees fabricated over $300 million in sales in just 11 months after its initial public offering on Nasdaq.

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