President Trump on Thursday issued executive orders to ban TikTok and Wechat from operating in the US in 45 days if they are not sold by their Chinese parent companies.
Trump had on Monday changed his mind to ban the apps following a meeting with Microsoft’s CEO Satya Nadella and the persuasion of members of the Republican Party. Trump thus set September 15 deadline for the acquisition of TikTok from ByteDance, but his new order means the app would be banned if the deal fails.
Negotiation between Microsoft and ByteDance is still ongoing in a deal that Microsoft is expected to pay between $10 billion to $30 billion. Trump said the latest order is masterminded by his finding that “additional steps must be taken to deal with the national emergency with respect to the information and communications technology and services.”
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
The United States government’s concern had been centered on TikTok, until recently when attention was extended to WeChat.
Trump said the decision to include WeChat is because like TikTok, it captures vast swaths of information from its users which the Chinese Communist Party has access to.
He said for example, in March 29, “a researcher reportedly discovered a Chinese database containing billions of WeChat messages sent from users in not only China but also the United States, Taiwan, South Korea, and Australia.” And the app also censors content that the Chinese Communist Party deems politically sensitive.
WeChat, owned by Tencent offers financial transaction services to users and it is used by millions of people around the world, including the United States. The executive order aims at prohibiting such transactions in the US.
“The following actions shall be prohibited beginning 45 days after the date of this order, to the extent permitted under applicable law: any transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the United States, with Tencent Holdings Ltd,” the order said.
“45 days after the date of this order, the Secretary shall identify the transactions subject to subsection (a) of this section,” it added.
Trump justified the order citing threat to national security and made reference to India’s TikTok ban, quoting the country’s Ministry of Electronics and Information Technology which said that TikTok was “stealing and surreptitiously transmitting users’ data in an unauthorized manner to servers which have locations outside India.”
The United States government had on the same language of ‘national security threat’ banned the military and federal agencies from using TikTok, a trajectory the Joe Biden campaign has followed.
While TikTok appears to have a lifeline, WeChat doesn’t. Unlike TikTok that has been around the pressure for a while, thus making preparation for a possible acquisition, WeChat didn’t see it coming. Though there has been a lot of talk from the US policymakers about Chinese apps, the discussion has so much centered on TikTok.
The executive order may help Microsoft to negotiate a cheaper acquisition of TikTok, as the companies are hurrying to beat the deadline.
Trump is concerned that TikTok could be used to manipulate November presidential elections. The app was used in June to prank organizers of his Tulsa rally, where a group of youngsters made seat reservations but did not turn up, leaving the auditorium half empty and embarrassing him.
It is not clear what scope the ban will take as Trump said that part of the acquisition proceeds will go into the US treasury. However, analysts believe that the US’ move to ban the Chinese apps may usher in a new wave of conflict between the two economic powers.
“The executive orders represent a major escalation on the US side of the confrontation with China over the use of technology and mark the first time the US government has attempted to ban a software application running on millions of mobile phones within the US,” said analysts at political risk consultancy Eurasia Group.
The group noted that the implication of the ban may force Beijing to retaliate.
“The US actions against TikTok and WeChat could be a turning point in Beijing’s calculus around how to respond to the US policy actions that have now either impacted or threatened to impact all of China’s national tech champions,” the group said.
China has decried the move, saying that the US is unjustifiably attacking Chinese companies to “maintain monopoly” over them, and urged Trump to rescind his decision because “it goes against market principles and international trade rules.” It is not clear what measures China’s retaliation will take.