In the southern Chinese city of Dongguan, massive aluminum sheets hang from the ceiling of Danny Lau's factory, where workers hurry to apply protective oil coatings.
For decades, Lau's Hong Kong-based business thrived on the mainland's competitive manufacturing environment. But now, amid intensifying U.S.-China trade tensions, Lau says the current economic challenges are the most severe he's faced.
"We never expected such a sharp drop in orders," Lau said, pointing to the escalating tariffs as a key factor.
During Donald Trump's first term as U.S. president, Lau's aluminum-coating business was hit with a 25% tariff. Since Trump's return to office in 2025, the situation has worsened dramatically. The U.S. has imposed a sweeping 145% tariff on Chinese aluminum products, while China has retaliated with its own 125% tariff. In total, Lau says these policies translate into a 75% tariff burden on his products alone.
Lau's company, Kam Pin Industrial, depends on the U.S. for about a third of its orders. While one American client has committed to finishing an ongoing project with him due to the lack of alternative suppliers, the long-term outlook is bleak. "Some clients have already indicated they may not continue doing business with us," Lau said. "The prospects are grim."
Anticipating further tariff hikes, Lau began exploring new export markets in late 2024, including visits to several Middle Eastern countries. Although many Chinese exporters have been diversifying their client bases since Trump's earlier presidency, Lau admits that replacing the U.S. market is no easy task.
"The U.S. market is valuable - it has strong purchasing power, demands high-quality goods, and expects timely delivery," he said. "Losing that market would be a major blow."
While companies like Lau's struggle, others have adapted. Zhuoyuan VR Tech, a virtual reality equipment and gaming company, has successfully pivoted toward emerging markets in Southeast Asia, Latin America, and the Middle East. Zou Huajian, who oversees the company's exports, said they shifted strategy after the COVID-19 pandemic hit their business hard.
"The cultural preferences and consumption habits in these regions are quite similar to China's," Zou noted. As a result, the company has scaled down its focus on the U.S., which now accounts for less than 10% of its business, citing a declining interest in entertainment spending.
Today, over half of Zhuoyuan's orders come from outside China, with Asia-Pacific countries - particularly India - becoming major growth areas.
As trade tensions reshape the global export landscape, Chinese companies are being forced to innovate, adapt, and reimagine their futures beyond the once-lucrative U.S. market.
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