Semiconductor ETFs tested their long-term trend lines on Thursday as the trade-induced, risk-off selling continued with Chinese officials throwing more fuel into the fire.

On Thursday, the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) declined 1.6% and the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) decreased 1.7%, with both ETFs slipping below their long-term trend lines at the 200-day simple moving average.

The broad sell-off in the equities market continued Thursday after a Chinese official said the U.S. should “adjust its wrong actions” if it would like to continue negotiations in response to the Trump’s administration’s restrictions on the telecommunications giant Huawei Technologies, fueling investors’ concerns that Washington and Beijing are moving further apart on a trade deal.

Following the U.S. Commerce Department’s decision last week to blacklist Huawei and effectively halted the Chinese telecom firm’s ability to buy American-made parts and components, Google has suspended business activity with the Chinese giant, along with a number of Huawei suppliers, including Qualcomm, Broadcom, Intel and Xilinx, CNBC reports.

U.S. semiconductors were among the hardest hit in the wake of the Huawei blacklisting as chipmakers lost a big customer in Huawei, the world’s largest provider of telecommunication equipment, which purchased about $20 billion in semiconductor chips each year.

“Let’s be clear – we are talking tens of billions of dollars impact,” C.J. Muse, senior equity research analyst at Evercore, said in a recent note. “Loss of this business would slow down investments by U.S. chipmakers, thereby reducing the competitiveness of the U.S. semiconductor industry – and that is a national security issue that the U.S. government needs to consider as well.”

RBC analyst Mitch Steves also warned that the U.S. restrictions could particularly impede companies with meaningful revenue exposure to 5G and the Chinese market.

“We view the Huawei and China/US relationship as a negative overhang on the semiconductor space and a lift of either would likely send the semiconductor industry materially higher (5-10% in our view),” Steves said in a recent note.

For more information on the tech sector, visit our technology category.

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