Late last week, U.S. President Donald Trump signed a pair of executive orders taking the first big step in the administration’s plan to block “untrusted” Chinese apps by effectively making it illegal for any person to engage in transactions with the developers behind the popular TikTok and WeChat apps.
While the first executive order prohibits any U.S. person or entity from making any transactions with ByteDance or its subsidiaries — effectively ruling out the use of TikTok for now — the second executive order more specifically addresses the WeChat app by name rather than Tencent, the Chinese behemoth behind it.
These differences in the two executive orders are surely no accident; targeting ByteDance rather than TikTok leaves the door open for a possible acquisition of TikTok by Microsoft, since the prohibition wouldn’t apply if the app were to change hands.
On the other hand, when it comes to WeChat, the Trump administration is being very careful not to paint with too wide of a brush — at least for now — since Tencent actually has its fingers in a staggering number of apps. Many more than you may have realized, in fact.
As noted by The Verge, an anonymous White House official told Sam Dean of the LA Times that the executive order is currently intended only to target WeChat, allaying fears that many of Tencent’s other holdings — from Spotify and Snapchat to League of Legends and Fortnite.
The current language of Trump’s executive order prohibits “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, as identified by the Secretary of Commerce.” But it’s not even clear what “related to WeChat” means at this point, and as a Tencent rep told The New York Times, they’re still trying to figure it out.
What It Could Mean
While the prohibition obviously involves the WeChat app itself, it could also apply to money transferred between Tencent’s subsidiary companies if those transactions are even remotely related to WeChat, in which case it may indirectly affect the ability for other developers to continue functioning due to their financial dependency on Tencent.
For example, Tencent is the sole owner of Riot Games, the developer behind League of Legends, while it owns more than 80 percent of Supercell, the studio that produces Clash of Clans, and 40 percent of Fortnite developer Epic Games. It also has a 12 percent stake in Snapchat and a 9 percent stake in Spotify, plus a partnership with the latter for “Tencent Music” in China.
It also goes well beyond the App Store. Tencent has a movie production company, Tencent Pictures that’s currently involved in several major Hollywood productions like Wonder Woman and Top Gun: Maverick, plus a 10 percent stake in Universal Music Group. It also recently struck a $1.5 billion five-year deal with the NBA to stream its games in China.
So there’s a lot more at stake here than just WeChat, although again the Trump administration has been careful thus far to limit its language to things “related to WeChat,” it remains to be seen how far-reaching this could become. While we’re not likely to see these other apps suddenly disappear from the App Store, it could make things a lot more complicated for the developers of those apps — especially those that rely on in-app purchases for funding.
Even if the language of the executive order doesn’t explicitly prohibit doing this kind of business with Tencent, there’s also the possibility that many banks and companies will err on the side of caution in order to avoid any potential risk of violating the U.S. sanctions. Banks could stop transmitting payments to companies like Riot and Supercell, or Apple and Google could block the in-app purchasing system in those apps, or even remove them from the App Store entirely of their own volition.
It’s also not even clear why the Trump administration is targeting WeChat as specifically as it is, other than perhaps to make a point. However,League of Legends could just as easily be sending user data to China as WeChat, so surely the security concerns being expressed by the administration should apply to any app that’s owned or controlled by Tencent.
Effectively a Global Ban
To be clear, the nature of these executive orders also mean that this isn’t simply a matter of Apple pulling TikTok and WeChat from the App Store for U.S. customers. Since Apple is a U.S. company, it’s now effectively forbidden from engaging in any transactions with ByteDance or with Tencent where WeChat is concerned. This would naturally include making payments to these developers for these apps.
In other words, it seems likely that Apple will be forced to remove TikTok and WeChat from the App Store worldwide, and not merely in the U.S., which could have a massive negative impact on Apple’s iPhone sales in China. WeChat is a core app for Chinese consumers, and a smartphone without WeChat would be effectively useless in China — it would be like an Android phone with Google apps or an iPhone without Facebook, iMessage or the App Store.
Then of course there’s the likelihood that this is merely the first salvo in what will be a much longer series of battles in the Trump administration’s war with China. U.S. Secretary of State Mike Pompeo has already suggested that the administration will be targeting more apps that “are significant threats to the personal data of American citizens” and known for spreading viruses, propaganda, and misinformation, and even this is only part of a five-pronged approach that will also involve banning key U.S. apps like Facebook and Twitter from being installed on Chinese phones by companies like Huawei, as well as blocking interoperability between Chinese and U.S. cell phone carriers.
Meanwhile, as the situation continues to escalate, the spectre of lost iPhone sales in China may not even be Apple’s biggest hurdle to overcome, with a groundswell of anti-Apple sentiment already beginning among Chinese citizens and the possibility of retaliatory sanctions against Apple by the Chinese government.