The mass removal of Chinese firms from the New York and NASDAQ stock exchanges looms large over firms such as Alibaba (BABA  ) and Baidu (BIDU  ) as the Securities Exchange Commission (SEC) moves forward with implementing a stringent Trump-era law.

In an era marked by a stark political divide between the Republican and Democratic parties, the Holding Foreign Companies Accountable Act served as a rallying cause for U.S. Lawmakers, passing unanimously in both the House and Senate and receiving then-President Donald Trump's approval a month. The act amended the 2002 Sarbanes-Oxley Act to require foreign companies in the United States to disclose any foreign entanglements to the Public Company Accounting Oversight Board or face delisting.

On Wednesday, the SEC issued a statement declaring that it had begun implementing the HFCAA into existing securities regulations. However, the process may take some time as the SEC was more or less forced to rush its new rules out the door due to the Commission being required to do so within 90 days of the bill being signed into law. The SEC is currently seeking public comment on the act while it looks to implement the other areas of the HFCAA that weren't under the 90-day deadline.

The reluctance of Chinese firms and the Chinese Government to comply with disclosure laws will likely be their undoing, especially as Sino-American relations appear to be worsening, as evident by the recent summit in Alaska, in which the US and China fired sharp rebukes at one another. Delisting the firms would not only deny Chinese firms access to the lucrative capital markets boasted by the United States, but it would also deny American investors access to Chinese firms.

According to the HFCAA, firms would be denied access through both the NYSE and NASDAQ markets, and "through any other method that is within the jurisdiction of the Commission to regulate, including through the method of trading that is commonly referred to as the `over-the-counter' trading of securities."

Chinese firms predictably took a considerable hit during trading this week. Alibaba, for example, began trending downward on Wednesday, losing 3.4% by market close and slid a further 1% through Friday. Tech firm Baidu suffered a similar fate, losing 20% of its share price in the same period.