U.S. expels Wechat and Tiktok from app stores on China concern
The U.S. moved to expel the Chinese-owned Wechat and Tiktok apps from U.S. app stores as of Sunday, while reserving the right to reverse a ban on Tiktok’s video-streaming service once it can hammer out a deal to satisfy national security concerns.
Commerce Secretary Wilbur Ross said Friday that the U.S. will prohibit cash transfers within the U.S. related to Wechat and parent company Tencent Holdings Ltd. Other measures prohibited as of Sept. 20 include distribution, maintenance and updates of Wechat or Tiktok through app stores in the U.S.
The order doesn’t extend overseas, which had been a concern of some U.S. companies.
Ross said that the two apps are being handled very differently. “Americans will still be able to use Wechat for payments in China. Wechat U.S. for all practical purposes will be shut down,” he said on Fox Business. “For Tiktok, it’s just upgrades, maintenance and things like that that will be shut down at this stage, the real shut down would come after Nov. 12 in the event there is not another transaction,” Ross said.
The Commerce Department restrictions lay out two, largely separate timelines for Wechat and for Tiktok, which is owned by Bytedance Ltd. Restrictions for both go into effect on Sept. 20, but prohibitions on companies providing services to Tiktok will be extended until Nov. 12, allowing the video app additional time to hammer out a deal with Oracle Corp. that satisfies the Trump administration. If Tiktok, Oracle and the Trump administration can come to a deal by Sunday, then the app stores won’t have to kick Tiktok out, one person familiar with the matter said.
“I can just say our goal is really very straightforward — protecting the American information and data from ending up in the hands of the Chinese Communist Party,” Secretary of State Mike Pompeo said, speaking to reporters from Guyana. And so while we are reviewing the proposal, trying to evaluate if we can successfully achieve those outcomes, that will be our measure.”
If the national security concerns are resolved by Nov. 12, the prohibitions on Tiktok may be lifted, the Commerce Department said, noting in a press briefing Friday that it took pains not to disrupt ongoing deal negotiations.
Oracle shares were little changed at $60 at 11:23 a.m. Friday in New York. Tencent’s American Depositary Receipts were up almost 1% at $67.30.
Tencent said it’s “reviewing” the Commerce Department statement. “Following the initial executive order on August 6 we have engaged in extensive discussions with the U.S. government, and have put forward a comprehensive proposal to address its concerns.” Tencent said “the restrictions announced today are unfortunate,” and that it will continue to talk with the government to come up with a long-term solution.
U.S. officials said that American users who have the Wechat app on their phone will still be able to use it to talk with family and friends overseas after the ban goes into effect on midnight Sunday. Americans in China will also be able to continue using Wechat. What is changing is that new users won’t be able to download Wechat in the app store and existing users will not receive updates.
Also, because Tencent relies on third-party providers to host and send data, users will experience slowdowns and some dysfunction so a message might time out or there will be a temporary outage. Over time, as users can’t update the app, Wechat will be degraded and phased out. However, the order doesn’t go so far as to restrict internet service providers or require them to block access to Wechat in the form of the content firewall that’s in place in China.
The Information Technology & Innovation Foundation, a trade group, said the rule puts an “unnecessary burden on U.S. companies,” and that it “puts consumers at risk by cutting them off from software updates including necessary security updates.”
Privately, the initial reaction from American businesses was positive because the scope of the Wechat ban has been limited to U.S. transactions — which was the main goal of a coordinated lobbying push leading up to the Sept. 20 deadline, according to people familiar with the matter. Extending a ban to China would have dealt a blow to businesses like Starbucks Corp. and Walmart Inc. which rely on the app for their China operations.
The Commerce restrictions place the onus on Apple Inc. and on Alphabet Inc.’s Google to delete both the Tiktok and Wechat apps from their U.S. app stores by Sept. 20.
Apple and Google are ready to comply with the deadline, after administration officials worked in multiple discussions with the companies to ensure that there’s no risk of confusion as the ban is applied, according to a U.S. official.