The AR business may be booming, but not so much for the AR startup Meta Co. Just as it was about to raise funds from China, the main investor pulled the money plug. Reason? Trade wars.

This in only the latest crack in the tension between the two of world’s largest economies. U.S. President Donald Trump has come out and announced a new set of tariffs on $200 worth of Chinese goods. Beijing was quick to respond in kind, promising countermeasures if Trump really goes the way. Yet amid all the officials’ back and forth, it is the smaller companies that take the hit. Meta Co, a Silicon Valley AR startup is the latest casualty. Having already pinned the deal with a Chinese investor, it is the Chinese officials who stopped the deal from happening.

‘The Chinese government sent an official request to our lead investor to re-evaluate the deal based on the recent actions from the Trump administration’ says the Meta CEO Meron Gribetz. He shares that $20M pullout could lead to a major backers abandonment, now that the main investor froze the deal. He had to react quickly, and decided to issue 30-day furloughs to more than half of the AR startup employees. The futures of the Meta Co. and many similar companies are in doubt.

It is through these lenses that we should view his next move. Initial plan frozen for now, the AR startup is opening a subsidiary in China in an attempt to break free from anything to do with the dollar. Having the chips in their handw (the Meta suppliers), the Chinese are winning one over the Trump administration in the AR arena. Though India is on the rise, China has the biggest AR potential by far. Yean will therefore be the preferred option for many AR startups.

China is the biggest foreign investor in Augmented Reality technology. The Chinese investment has soared to $1 billion, more than 20 times in last 4 years. It is no wonder that with the trade war a-blazing, the Chinese government sees AR as a valuable arena. Gribetz explains: ‘any company that wants to raise significant amount of capital, manufacture goods in a cost effective way, and conquer markets hungry for early adoption, must have a presence in China’.

AR Startup is a New Trade War Casualty

It is not China only that pulls out. All foreign investment looks threatened by the oversee arm wrestle. It’s a war that’s seen some losses so far, both side of the Pacific, but appearently not much for it to stop. But big numbers are not telling the truth. It is the smaller companies and their employees that will have to succumb to desperate measures should this continue.

‘This was a big shock to us’, says Gribetz about the pullout. While he is trying to salvage something from the shipwreck, many startups face the same threat. AR startup companies in particular. While we wait for the state officials to chess it out, Augmented Reality startups will serve as their peons.