In the bustling industrial hub of Dongguan, southern China, the sprawling factory of Hong Kong businessman Danny Lau stands as a stark reminder of the escalating pressures exerted by the renewed US-China trade war. Massive aluminum sheets await processing as workers diligently apply oil coatings, a scene that has played out for decades since Lau established his mainland China operation in the 1990s, drawn by the promise of lower manufacturing costs.

While Lau’s factory, Kam Pin Industrial, has weathered previous economic storms, the current surge in tariffs has proven to be the "most difficult" challenge yet, he laments. "We didn't expect that our orders would suffer so heavily," Lau explained, reflecting on the unexpected downturn in business.

During the first term of a recent US administration, the factory faced a significant 25% tariff on its aluminum coatings. With the return of that administration to the White House this year, trade tensions have intensified dramatically. The U.S. has imposed sweeping 145% tariffs, prompting China to retaliate with tariffs reaching 125%. For Lau’s specific products, this translates to a crippling 75% levy.

The impact on Kam Pin Industrial is tangible. One-third of the company’s clientele originates from the U.S. While one American client expressed their intent to continue sourcing materials from Lau for an ongoing project due to a lack of alternative suppliers, they indicated a strong need to reconsider their sourcing strategy for future projects. Several other U.S. clients have been more direct, informing Lau that the prospects of continued business are "slim." "Prospects are grim," Lau conceded, acknowledging the challenging outlook.

Anticipating the potential for escalating tariffs, Lau’s company began exploring opportunities in new markets in late 2024. This proactive approach included recent visits to several Middle Eastern countries. While other Chinese exporters have been diversifying their markets since the initial wave of tariffs, Lau has found the U.S. market particularly difficult to replace.

"The U.S. market has big advantages — it has the ability to pay, and they have demand for high quality and punctual delivery," Lau emphasized. "Without that market, it would be difficult for us."

However, not all Chinese manufacturers face the same bleak outlook. Zhuoyuan VR Tech, a virtual reality equipment and game company, has successfully tapped into demand in Southeast Asia, Latin America, and the Middle East.

"The living standard, views on consumption, and the cultural feelings of these countries are close to those of China," noted Zou Huajian, who oversees export business at Zhuoyuan VR Tech.

Zou explained that his company strategically shifted resources towards developing economies following the disruptions caused by the COVID-19 pandemic. As a result, the U.S. now accounts for less than 10% of their business, a decline Zou attributes to a reduced appetite for entertainment spending in that market.

Currently, half of Zhuoyuan VR Tech’s orders originate from countries outside China, with a significant portion coming from Asia-Pacific nations, including India, which has emerged as one of their largest export markets. This diversification strategy highlights a potential pathway for some Chinese manufacturers to navigate the turbulent landscape of international trade.


Danny Lau, Managing Director of Kam Pin Industrial (HK) Ltd, stands near an aluminum panel produced at its factory in Dongguan city in southern China’s Guangdong province on Thursday, April 17, 2025. (AP Photo/Ng Han Guan)

An aerial view of a factory of Kam Pin Industrial (HK) Ltd, manufacturer of coated aluminum panels, in Dongguan city in southern China’s Guangdong province on Thursday, April 17, 2025. (AP Photo/Ng Han Guan)

A worker labors on a platform for a virtual reality game machine produced at the factory for Zhuoyuan Tech Co., Ltd in Panyu district of Guangzhou city in southern China's Guangdong province on Wednesday, April 16, 2025. (AP Photo/Ng Han Guan)

A worker holds together aluminum panels at a factory of Kam Pin Industrial (HK) Ltd, in Dongguan city in southern China's Guangdong province on Thursday, April 17, 2025. (AP Photo/Ng Han Guan)

A worker monitors paint being coated on aluminum panels at the factory of Kam Pin Industrial (HK) Ltd, in Dongguan city in southern China’s Guangdong province on Thursday, April 17, 2025. (AP Photo/Ng Han Guan)

A worker prepares aluminum panels for coating at a factory of Kam Pin Industrial (HK) Ltd, in Dongguan city in southern China’s Guangdong province on Thursday, April 17, 2025. (AP Photo/Ng Han Guan)

A worker prepares aluminum panels for coating at a factory of Kam Pin Industrial (HK) Ltd, in Dongguan city in southern China's Guangdong province on Thursday, April 17, 2025. (AP Photo/Ng Han Guan)

A worker welds together metal parts at the factory of Kam Pin Industrial (HK) Ltd, manufacturer of coated aluminum panels in Dongguan city in southern China's Guangdong province on Thursday, April 17, 2025. (AP Photo/Ng Han Guan)

Workers check aluminum panels produced at a factory of Kam Pin Industrial (HK) Ltd, in Dongguan city in southern China's Guangdong province on Thursday, April 17, 2025. (AP Photo/Ng Han Guan)

Workers prepare aluminum panels for coating at a factory of Kam Pin Industrial (HK) Ltd, in Dongguan city in southern China's Guangdong province on Thursday, April 17, 2025. (AP Photo/Ng Han Guan)

Zou Huajian, overseas sales manager of Zhuoyuan Tech Co., Ltd talks about the Virtual Reality products at the experience center in Panyu district of Guangzhou city in southern China’s Guangdong province on Wednesday, April 16, 2025. (AP Photo/Ng Han Guan)

A worker past by a virtual reality experience platform built at the factory of Zhuoyuan Tech Co., Ltd in Panyu district of Guangzhou city in southern China’s Guangdong province on Wednesday, April 16, 2025. (AP Photo/Ng Han Guan)

A man tries out a virtual reality platform at the experience center of Zhuoyuan Tech Co., Ltd in Panyu district of Guangzhou city in southern China’s Guangdong province on Wednesday, April 16, 2025. (AP Photo/Ng Han Guan)

Completed virtual reality gaming platforms are covered up at the factory of Zhuoyuan Tech Co., Ltd in Panyu district of Guangzhou city in southern China’s Guangdong province on Wednesday, April 16, 2025. (AP Photo/Ng Han Guan)