Fears of a trade war between the US and China have escalated in the past few weeks. But in an unusual turn, President Trump has said that he is targeting Chinese technology specifically. Three years ago, China developed an industrial plan, dubbed "Made in China 2025," to achieve its goal of dominating the robotics, aerospace, and semiconductor sectors. China is attempting to close the technological gap and control domestic markets, planning to rheach 40% self-sufficiency by 2020 and 70% by 2025.The US is now attempting to counter this threat. owever, it could eventually lead to a technological cold war if sanctions continue to escalate from both sides.

Trump plans to counter China's agenda by restricting investment in US technology firms by companies with more than 25% Chinese ownership. The Trump administration is claiming that China is using their plan to give its tech companies an unfair advantage over trade rivals by granting them subsidies.

Trump's statements caused some turbulence across markets, but chipmaker Micron Technology (MU  ) was particularly hard hit, fallling by about 7%. Micron generated about $20.3 billion in revenue last fiscal year, with more than 50% of this coming from China. Semiconductor equipment makers such as Applied Materials (AMAT  ), Lam Research (LRCX  ), and MKS Instruments (MKSI  ) are already quite vulnerable to a trade war because China is a big market for them. Richard Lane, an analyst at Moody's, stated in a report that "alternative suppliers of the array of leading-edge semiconductor equipment that Chinese companies need to produce chips do not exist." Moody's Investors Services said that a ban on chip equipment sales would be the toughest restriction as Chinese companies account for 6%, or $1.8 billion, of combined revenue for Applied Materials, Lam Research and KLA-Tencor (KLAC  ). In fact, semiconductor companies earn the highest percentage of their revenues from China at about 52%.

Intel Corp (INTC  ), Samsung, and Taiwan Semiconductor Manufacturing have typically been the major buyers in the market, but Chinese chip makers are also making a move. China made up about 14% of the trailing 12-month revenue for the top eight semiconductor companies, so this means a potentially large loss in future sales. A few days ago, the Dow Jones Industrial average sank nearly 500 points due to this scare. Although it recovered slightly, it still closed down more than 300 points. Tech-heavy NASDAQ also closed down 2.1% on trade war concerns. Qualcomm and Intel fell around 2.5% and 3.4% respectively.

The Semiconductor Industry Association (SIA) which represents US leadership in semiconductor manufacturing, design, and research, released a statement regarding Trump's tariff plan: "While the US semiconductor industry shares the Trump Administration's concerns about China's forced technology transfer and intellectual property (IP) practices, the proposed imposition of tariffs on semiconductors from China, most of which are actually researched, designed, and manufactured in the US, is counterproductive and fails to address the serious IP and industrial policy issues in China. We look forward to working with the Administration to explain why imposing tariffs on our products would be harmful to our competitiveness and does not address our challenges with China."

However, one of Trump's top economic advisors, Peter Navarro, later told CNBC that the market misinterpreted Trump's plan for trade policy and that Trump is not planning to restrict trade to any specific country but those that misuse US technology in general. This helped markets recover a bit, but still, such a move can lead to deep hostility between the two nations.