President Trump issued two executive orders on Thursday to prohibit all transactions with TikTok and WeChat in 45 days’ time.
The executive order to ban TikTok is the culmination of the angst the President has shown in public recently. The axe on WeChat, on the other hand, fell very quickly. Owned by the Chinese internet and gaming company Tencent, the messaging and payment service has only been cited once as one of the rotten apples in an interview of Mike Pompeo, the Secretary of State, prior to the executive order.
The contents of the two orders are largely identical. Trump invoked two laws enacted in the 1970s, the International Emergency Economic Powers Act (IEEPA) (1977) and the National Emergencies Act (NEA) (1976) to justify his moves. The President found that these two mobile apps “developed and owned by companies in the People’s Republic of China (China) continue to threaten the national security, foreign policy, and economy of the United States.”
Their offences are deemed to include “automatically capturing vast swaths of information from its users.” In TikTok’s case, such data, including internet and other network activity information such as location data and browsing and search histories, “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.”
In WeChat’s case, the data collected also includes “the personal and proprietary information of Chinese nationals visiting the United States”, which could allow “the Chinese Communist Party a mechanism for keeping tabs on Chinese citizens who may be enjoying the benefits of a free society for the first time in their lives.”
The executive orders forbid all transaction by any person or entity under the jurisdiction of the United States with ByteDance (the owner of TikTok) and WeChat, starting 45 days after the orders are issued. However, exception is given to contracts entered into or licences or permits granted before the date of the orders.
An additional measure related to WeChat’s “ability to transfer funds or other assets instantaneously”, there will not be prior notice of an identification to those persons of measures who may have an interest to make such transfers, as such notices would render the measures of prohibition ineffectual.
It is worth noting that the banning of WeChat does not extend to Tencent’s other business in the US, for example its gaming business.
The impacts of the orders on the users of the two applications and on the two companies that own them are different. While a big number of American users of TikTok will find it inconvenient (it has been downloaded over 175 million times in the United States), they can find replacement without too much difficulty, with Instagram likely to be the biggest beneficiary. For ByteDance, however, if the deal with Microsoft’s expanded acquisition plan goes through, it will mean the company is retreating to become a China-only business.
WeChat, on the other hand, has only about 3 million users in the United States, largely the Chinese diaspora and those with close ties with China. But the impact on this small group will be much heavier. Since WhatsApp, Telegram and the like are inaccessible in China, WeChat has become the de facto communication channel to maintain contact with their close ones living in China. More importantly, to the livelihood of many, a large number of export oriented small companies and individual traders rely on WeChat to receive payments from their trading partners overseas. The asynchronous onslaught of COVID-19 in China and in the US has already driven some out of business. Taking away a vital tool in WeChat Pay could be a fatal blow to others. For Tencent, on the other hand, the impact would be tangible but limited, with its one billion users primarily in China.
If Mr. Pompeo’s comment that the US is going to take care of “countless more” Chinese software and technology companies operating in America is something to go by, these two executive orders are highly unlikely to be the last. And it is hard for the Chinese companies to “sit this one out” till after the general election in November. Whichever party wins the presidency, as we reported earlier, facing off China in the technology arena is becoming one of the very few issues that can win bipartisan support in American politics today. The most recent example is that, hours before the executive orders were issues, the Senate unanimously passed a bill to forbid federal government employees from using TikTok on government-issued devices.