The answer is simple:
you’re using a cheat/trainer that improves relations, and it is making your enemies your friends. you will need to load a save from before using the cheat/trainer, or start a new game. The battle is easily winnable even when choosing “not many” on a standard play-through as it is merely the end of act i. you’re supposed to win. only the fight with the boss is supposed to be challenging. start anew, or reload a save from before you started using the cheat/trainer’s improved relations function. do not use that function at all ever during game play.
if you’re having difficulty with your relations, make a lot of micro transactions (such as herbs) where you tip the trader. do not steal too often until you can get the “infamous” perk (main level 10). this allows you to improve relations faster when it is below 50%. also, be more careful and stop getting caught.