No More TikTok?

Our Weekly 2 Minute Read

Edition 109 - August 9, 2020

 

The inevitable has happened; President Trump issues an executive order to ban two major Chinese apps from the U.S. market. You guessed it: Tiktok and WeChat. The order was issued on August 05th 2020; an order that states in 45 days, Americans will no longer be able to carry out any transactions with the parent companies of Tiktok and WeChat. This means that any advertising and licensing deals with these platforms will be halted in the U.S. Also any downloads in the app store will be stopped as well.

Why is this happening? Well the argument for issuing the order is due to national security concerns. Since TikTok currently has around 100 million users in the U.S. and WeChat has around 19 million, the concern is around data security and data privacy. Although the concern is only just a concern and not to a level of national security, the issue is that China could potentially use the data as leverage for purposes that could be bad for the U.S.

The unsettling competition of technologies between the U.S and China suggests that there could be other motives involved too since U.S. platforms such as Youtube, Facebook and Google are blocked in China.

Since there is 45 days before the executive order is in effect, this gives time for everyone to adjust. Microsoft might be the ones who would need this time the most since they were in the talks of acquiring Tiktok. It is also interesting that this order comes on the same day that Facebook launches a new product called Instagram Reels which is very similar to Tiktok. During this time for adjustments and negotiations, it will ultimately be left to the Secretary of Commerce to decide which services offered on Tiktok and WeChat are subject to be banned and which would still be allowed.

Whatever ends up happening in the next 45 days, this will have some significant effects. As soon as the announcement occurred, huge companies in China such as Tencent loses $35 billion of market value. Alibaba drops 6.7% and JD.com drops 5%. The results of the next 45 days is going to have some interesting effects on the relationship between U.S. and China and the people who are connected by the services of these platforms.

-Mike Ye