U.S. President Donald Trump on Thursday unveiled sweeping bans on U.S. transactions with China’s ByteDance, owner of video-sharing app TikTok, and Tencent (0700.HK), operator of messenger app WeChat, in a major escalation of tensions with Beijing.
The executive orders, which go into effect in 45 days, come after the Trump administration said this week it was stepping up efforts to purge “untrusted” Chinese apps from U.S. digital networks and called TikTok and WeChat “significant threats.”
The Prolonged Quarrel
The hugely popular Tiktok has come under fire from U.S. lawmakers and the administration over national security concerns surrounding data collection, amid growing distrust between Washington and Beijing.
On Wednesday, U.S. Secretary of State Mike Pompeo expanded efforts on a program dubbed “Clean Network” to prevent various Chinese apps as well as Chinese telecoms firms from accessing sensitive information on U.S. citizens and businesses.
James Lewis, a technology expert with Washington-based think tank Center for Strategic and International Studies, said the orders appeared coordinated with Pompeo’s announcement.
“This is the rupture in the digital world between the U.S. and China,” he said. “Absolutely, China will retaliate.”
“On TikTok, Trump is clearly putting pressure on Bytedance to close the deal,” Lewis said.
TikTok And WeChat In The US
TikTok has 100 million users in the United States. While WeChat is not popular in the country, the app, which has over 1 billion users, is ubiquitous in China. It is also widely used by expat Chinese as a main platform for communications with family and friends as well as a medium for various other services such as games and e-commerce.
WeChat and TikTok were among 59 mostly Chinese apps outlawed in India in June for threatening the country’s “sovereignty and integrity.”
Operator Tencent is China’s second most-valuable company after Alibaba at $686 billion. It is also China’s biggest video game company and earlier this summer opened California-based studio.
Its shares fell nearly 10% in Hong Kong after Trump’s order. The yuan CNH=, which is sensitive to Sino-U.S. relations, lost 0.4%.
Tencent and ByteDance declined to comment.
Why Is TikTok An Issue?
Yet the White House says what makes TikTok distinct is the theoretical possibility of it handing over data to Chinese authorities, as the Trump administration wages an intensifying trade war against China.
“This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information — potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage,” the executive order reads.
TikTok has downplayed its ties to Beijing, saying data it captures on U.S. users is stored mostly in Virginia. Officials at TikTok also insist the company has never turned over any data to Chinese authorities, despite the county’s broad national powers to request such data from private companies.
A federal class-action lawsuit involving dozens of American families claims an independent security review of TikTok revealed that the app is siphoning data, including the facial profiles of American children, and sending it to Chinese servers, though the suit does not provide evidence any information has ever been transferred to the Chinese Communist Party.
Microsoft Willing To Acquire TikTok Operations
Since the Trump administration began turning up the heat on TikTok, software giant Microsoft has confirmed it is among a handful of companies in early talks to acquire the short-form video service.
For Microsoft, a $1.5 trillion company that has focused its business mostly on corporate clients by selling software and cloud computing services, buying TikTok would be its first major foray into a social media platform popular among young users.
Microsoft already owns game console company Xbox, networking site LinkedIn, and messaging service Skype.
Officials at Microsoft say it is examining a TikTok acquisition that would potentially buy TikTok’s American, Canadian, Australian and New Zealand services, but officials close to the deal say the final offer may include operations in even more countries.
TikTok Vs Facebook Reels
Trump’s executive order comes on the same day Facebook launched a new product Reels, a video-sharing app that mimics TikTok’s core features.
TikTok has accused Facebook of introducing a “copycat” service, arguing the social network is trying to capitalize on the administration’s zeal to punish China for its own benefit.
Trump on Thursday also signed an executive order to restrict the business between China-based Tencent Holdings, the owner of WeChat, and U.S. citizens.
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