• Experts and  observers are wary of a trade war ensuing between the U.S and China.

Experts and observers are wary of a trade war ensuing between the U.S and China. (Photo : Getty Images)

Eric Li owns a glass factory in southeast China and business has been tough as high labor costs and stringent regulations put a stranglehold on operations. With President Donald Trump’s latest threat to impose tariffs on goods, the situation could get tougher, according to a report by Yahoo Finance.

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The company founded by Eric Li’s Taiwanese father could face bankruptcy soon as profit margins shrink further and the manpower depleted from 1,000 to 150 workers.

Many more small and medium-sized factories could be facing the same fate. Business owners are even considering the possibility of closing or selling out if Trump remains true to his word to implement a levy on Chinese products.

“Smaller companies tend to be focused and are not diversified like big players are,” said Karel Eloot, a senior partner at McKinsey & Co. in Shanghai. “They would be the most exposed and dependent on whatever happens with U.S. import duties.

Potential trade war amid criticisms toward China

Experts and observers are wary of a trade war ensuing between the U.S. and China. Further complicating matters is Trump’s accusation against China of unfair trade practices and currency manipulation.

U.S. Commerce Secretary Wilbur Ross has also stated that measures will be announced once a proper case has been prepared.

Although the administration’s harsh statements have softened in recent weeks, the possibility of a tax at the top end of Trump’s campaign proposal could initiate an 87 percent decline in Chinese exports to American consumers.

China might respond in retaliation, reciprocating U.S. tariffs with a levy on American products such as Boeing airplanes, iPhones and soybeans. In addition, China could also clamp down on U.S. businesses operating within the country.

“There’s too much at stake for both countries to engage in a trade war,” said Eddy Li, president of the 3,000-member Chinese Manufacturers’ Association of Hong Kong. “Although we are concerned about such a scenario, we also feel optimistic.”