By Alexandra Alper

WASHINGTON (Reuters) – The U.S. government is considering the possibility of delisting Chinese companies from U.S. exchanges, a source briefed on the matter said on Friday, in what would be a radical escalation of trade tensions between the U.S. and China.

The move would be part of a broader effort to limit U.S. investments into China, the source said, confirming an earlier report by Bloomberg that sent shockwaves through financial markets.

Shares of Alibaba Group Holding <BABA.N>, JD.com <JD.O>, Pinduoduo <PDD.O>, Baidu <BIDU.O>, Vipshop Holdings <VIPS.N>, Baozun <BZUN.O> and IQIYI <IQ.O> fell between 2% to 4% in afternoon trading.

China’s yuan currency, traded in off shore markets <CNH=>, fell by 0.4% against the dollar after the news to trade near its weakest against the greenback in about three weeks.

Exact mechanisms for how to delist the companies were yet to be worked out and any plan is subject to approval by President Donald Trump, who has given the green light to the discussion, Bloomberg reported https://www.bloomberg.com/news/articles/2019-09-27/us-china-trade-war-latest-us-weighs-limits-on-portfolio-inflows, citing a person close to the deliberations.

Trade talks between the United States and China are set to resume on Oct. 10 in Washington, CNBC reported on Thursday, citing three people close to the talks.

The report also rocked New York’s broader stock indexes, knocking around half a percent off the value of the S&P 500 in midday trading.

The largest U.S. exchange-traded fund tracking Chinese stocks, the iShares China Large-Cap ETF <FXI.P>, slid by more than 1.4% from its level before the report to hit its lowest since early September.

(Reporting by Alexandra Alper, Patricia Zengerle and Chris Sanders in Washington and Shubham Kalia and Supantha Mukherjee in Bengaluru; editing by Arun Koyyur and Patrick Graham)