Members of the Trump regime have been discussing their plans to do this since even before Christmas, and Trump has said several times in recent weeks that he would like to sanction China in response to the pandemic, but now they're finally doing it at a time when the global economy is already in shambles.
The Commerce Department placed Chinese-owned telecommunications giant Huawei on their export-control "blacklist" last year which limited the ability of American-owned businesses to sell their equipment and software to the company, but they're going significantly further than that now.
The department is placing restrictions on foreign companies, like Taiwan's Semiconductor Manufacturing Co. (TSMC), that use American patents in their factories to produce chips for Huawei.
From Bloomberg:
The new restrictions constrain the entire contract chipmaking industry because they all use equipment from U.S. vendors Applied Materials Inc., Lam Research Corp. and KLA Corp. in wafer fabrication plants. It steps up an ongoing White House campaign to contain Chinese technology giants viewed as a threat to national security, particularly Huawei -- the company at the heart of a global fifth-generation network rollout and Beijing’s Made in China 2025 effort to lead the development of future technologies. [...]
All global chipmakers, including TSMC and China’s own SMIC, need gear from U.S.-based companies to fabricate chips for everything from smartphones to supercomputers. But the latest measure affects TSMC disproportionately because it counts on Huawei for about 10% of its revenue, according to Bloomberg’s supply chain estimates.
This may materially and financially harm Huawei to some degree, but China's ruling party may very well see this as a public relations coup.
Trump is now telling foreign companies who they can and cannot sell to and, more importantly, he's sticking his middle finger in Taiwan's face. TSMC is Taiwan's single largest employer and Trump is attacking their jobs that have absolutely no relevance to American "national security." This could and very likely will push Taiwanese public sentiment closer to China and further away from the United States.
This news probably won't grab many headlines right now, but this is the kind of politically-motivated grievance campaign that will prolong global economic recovery and sour international relations for many years after Trump is gone.
Trump is doing this for personal reasons, not because foreign companies using a patent for some gizmo designed by Americans 40 years ago poses a legitimate threat to national security. From foam pool noodles to lawn chairs and now inert semiconductor wafers, the Trump regime has cited "national security" so many times the term has become effectively meaningless. No one even takes it seriously anymore because everyone knows what's really going on here.
The Commerce Department was forced to exempt numerous American companies from their blacklisting of Huawei because the Chinese company was among if not their biggest customer they relied on for business. It's possible this could turn out the same way after the Taiwanese government calls the White House and tells them to get fucked.