Chip stocks are beginning to fall Wednesday as a report from Bloomberg outlines the Biden administration's plans for stricter trade regulations on chip exports to China. In addition, former President Donald Trump made comments in an interview with Bloomberg suggesting Taiwan should pay for US security.

Principal Asset Management chief global strategist Seema Shah sits down with The Morning Brief to give insight into the possible restrictions and what it means for the chip sector and the broader equity market (^DJI, ^IXIC, ^GSPC).

"In a way, this is not unexpected. I think everyone has been anticipating that,as you see this continuation of US-China tensions, that, unfortunately, some of these chip makers, technology almost falls right into the spotlight," Shah tells Yahoo Finance. "On top of that, of course, you've got very, very, very rich valuations for these companies. So inevitably, there's going to be some kind of consideration from investors about how this proceeds."

Shah finds that the US economy will benefit the most from global economic tightening: "It's the rest of the world that would struggle on a relative basis. Within that scenario we pinpoint India and Japan as the two countries, which are a little bit outside of some of that spotlight. So we continue to actually like those economies, Latin America, segments of it can do well."

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This post was written by Nicholas Jacobino