President Donald Trump has issued two executive orders in two days banning two Chinese behemoths from operating in America – and, in doing so, has created an infinite amount of questions. This week, Trump ordered bans to take effect in 45 days on ByteDance’s TikTok app and Tencent’s WeChat app.
The president’s TikTok ban is hardly the first that the app has faced around the world – India, Australia and other countries have already prohibited TikTok within their borders. But the U.S. executive order against Tencent was unexpected – and it could have far greater consequences for several areas of the digital economy. The executive order and other issues with Tencent have pertained to the usage of user data – but Tencent does business in other areas that don’t infringe on consumers’ data.
Trump’s order bans “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. … or any subsidiary of that entity.”
But many questions remain, the main one being the exact scope of the executive order. If “any subsidiary of that entity” means the order impacts Tencent’s holdings outside of WeChat, the ramifications for the gaming industry, the payments industry, FinTechs, BigTech and any tech company operating in China could potentially be huge.
Could WeChat Be Banned from Google’s and Apple’s App Stores?
Who knows, but one possible outcome is that the order could lead to WeChat being removed from Apple’s App Store on iOS in America. As Nikkei Asian Review reports: “The order will likely force U.S. app stores, including Google’s and Apple’s, to remove TikTok and WeChat. It is unclear whether using or downloading the apps will be prohibited in the U.S. after 45 days, according to legal experts.”
Washington, D.C.-based think tank The Brookings Institution said that continued U.S. access to WeChat “is an important concern for the Chinese diaspora in the U.S., in part because access to many American social network apps are blocked in China.”
China Could Retaliate Against Big Tech and Other FinTechs
If the ban is enacted, China has already hinted at retaliation. Chinese state-run media has likened news of a potential TikTok sale to “open robbery,” and branded the U.S. as a “rogue country.” China Daily, as cited by CNBC, has said there are “plenty of options” to respond to what it calls a “planned smash and grab” by the U.S.
Among those options: a grassroots (publicly waged) campaign to spur a consumer-led backlash against the U.S. firms, which could be rocked if consumers keep their wallets and purses closed. Microsoft, though it gets low-single-digit sales from China, could be a target. Card companies, of course, have been trying to capture at least some portion of an estimated $27 trillion payments market.
An obviously high-profile target would be Apple, as China comprises roughly 15 percent of its sales. For instance, an overnight survey conducted in China and reported by Apple fan site iMore shows that 678,000 smartphone users would get different phones if WeChat was banned from the Apple App Store there. Details about the sample size or the percentage that wouldn’t buy a new phone weren’t available, but the sentiment is worth noting.
Will Americans Still Be Able to Play Fortnite?
Trump’s order could also turn the U.S. video game business upside-down.
Tech site The Verge noted that Tencent “is one of the largest tech companies in the world, and it’s spent the last few years buying stakes in video game studios, music companies and social media apps. It’s bigger than ByteDance, and with significant ownership stakes in Snap, Blizzard, Spotify and others, it’s far more embedded in the global tech industry.”
But the site said Trump’s order “made those connections much more dangerous, even if they fall outside the narrow legal consequences of the order. As Tencent responds and its business partners are forced to choose sides, the consequences could be far broader than the White House realizes — and far more damaging to the average consumer.”
Among Tencent’s video game holdings is Riot Games, which owns the hot “League of Legends” title. It also owns 40 percent of Epic Games, which in turn owns the super popular “Fortnite,” a game with 250 million global players.
Big Possible Impacts on the Payments Business
There’s also the payments angle with WeChat. U.S. merchants accept the company’s WeChat Pay platform, which 900 million people around the world used as of the end of 2019.
The Trump administration might try to block WeChat Pay, although that would require a coordinated effort by acquirers to not process the platform’s payments. Whether or not a White House executive order can legally require that remains to be determined.
Both of Trump’s executive orders leave it to U.S. Commerce Secretary Wilbur Ross’ office to define the terms “transactions” and “subsidiaries” and decide what’s banned and what isn’t. The bottom line: The next few days should be eventful.