On Thursday 6 August, Trump committed to imposing sanctions against TikTok and WeChat after taking a hard line on protecting US citizens’ data from Chinese interference.
Trump’s latest moves against TikTok and WeChat is part of the ongoing trade war between the US and China, and may prompt retaliation from China and Chinese consumers, a reaction which could further boost sales of Huawei devices.
Mikko Hypponen, a global security expert at F-Secure tweeted: “TikTok – the most downloaded app in the world – is no longer going to be available on Apple or Google devices. To me, this sounds like an opportunity for Huawei. Which is probably not what the White House was aiming for.”
TikTok-WeChat ban: Reaction from China and Huawei potential
Ongoing demands to regulate tech companies support government movements to uninvite Chinese companies from the US market. Liza Lin, a reporter for the Wall Street Journal said the plan “could force US-listed Chinese companies to decamp from American stock exchanges”.
These attempts at deglobalisation complement consumer nationalism. Mark Tibbs, cyber intelligence director at Mishcon de Reya says there is potential for “Chinese retaliatory action against US private companies which trade in China or rely heavily on Chinese production in their supply chains”. And there is already some evidence of this.
“Trump’s continual moves to ban Chinese companies in the US have angered Chinese citizens,” says Lynette Luna, telecommunication analyst at GlobalData.
In particular, Luna says Chinese-owned Huawei, the largest smartphone company in the world, may benefit from the nationalism of Chinese consumers with “more sales over Apple”.
This growing nationalism is prompting concerns for businesses.
“It’s a really tough thing for a global business environment that was used to things moving easily across borders now becoming more difficult for things to cross borders simply because political differences are becoming a big obstacle,” said Jonathan Cheng, the China bureau chief at Wall Street Journal.
Trump’s ban is the latest reproach against China
The ban has been framed as a security issue but is likely to be another way to undercut and restrict the Chinese market from US consumers, as seen already with Huawei.
“Huawei has little to no presence in the US thanks to the fact that carriers won’t sell its smartphones and the fact that Google and Qualcomm are not allowed to license technology to the vendor anymore,” says Luna.
Similarly, TikTok’s data collection was declared a “national emergency” by the White House as it “threatens to allow the CCP access to American’s personal and proprietary information, location data and internet search history”. However, this claim has been called into question, with no concrete evidence available that proves it is happening.
In a statement, The White House said:
“The spread in the United States of mobile applications developed and owned by companies in the People’s Republic of China continues to threaten the national security, foreign policy and economy of the United States.”
While stocks for WeChat owner Tencent were at a near an all-time high for the last few weeks, its stock fell nearly 10% following the executive order banning the app, and finished the day down 5%.
This highlights the importance of the US market, as the home of major tech giants.
The ban will be implemented 45 days after the date of the order, allowing a period of negotiation for a US company to acquire the North American operation of TikTok. Both Microsoft and Twitter have been said to have opened discussions.
This latest reproach towards China will mean that the fastest growing app in the world will be taken off the Appstore and Google Play Store, and no longer receive advertising from US companies.
Despite potential for growth in the Chinese mainland, the fact remains that the ban of both WeChat and TikTok in the US will have serious impacts for the company. How serious, however, remains to be seen.
Verdict deals analysis methodology
This analysis considers only announced and completed artificial intelligence deals from the GlobalData financial deals database and excludes all terminated and rumoured deals. Country and industry are defined according to the headquarters and dominant industry of the target firm. The term ‘acquisition’ refers to both completed deals and those in the bidding stage.
GlobalData tracks real-time data concerning all merger and acquisition, private equity/venture capital and asset transaction activity around the world from thousands of company websites and other reliable sources.
More in-depth reports and analysis on all reported deals are available for subscribers to GlobalData’s deals database.