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US-China tensions

US to ban transactions with TikTok and WeChat in 45 days

Donald Trump cites national emergency in plan to crack down on Chinese apps

President Donald Trump says the U.S. must take "aggressive action" to protect national security.   © Reuters

PALO ALTO, U.S./HONG KONG -- U.S. President Donald Trump has issued executive orders to ban U.S. transactions with WeChat, the messaging app owned by Tencent Holdings, and ByteDance, owner of TikTok, within 45 days, describing the Chinese-owned companies as threats to national security.

"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," said Trump in the two executive orders signed on Thursday.

"Additional steps must be taken to deal with the national emergency," he added.

The president's orders escalate his administration's ongoing crackdown on Chinese tech groups and sparked a strong response from Beijing. China's Ministry of Foreign Affairs spokesperson Wang Wenbin condemned Trump's decision on Friday, calling the orders "abuse of power" and "outright bullying."

TikTok, the video messaging app which has become one of the world's most downloaded, said it was "shocked" and threatened legal action.

ByteDance, Tiktok's owner, had already started talks with Microsoft over the sale of TikTok's operations in the U.S. and several other countries. The executive orders in effect give the parties a 45-day window to reach a deal.

Shares in WeChat owner Tencent ended the day 5% lower in Hong Kong after the company, one of Asia's most valuable, said it was "reviewing the executive order to get a full understanding".

One executive order issued by Trump will prohibit any transaction between U.S.-based individuals or companies and ByteDance. The second prohibits any transaction with Tencent that relates to WeChat.

The definition of "transaction" will be clarified by the Secretary of Commerce, also in 45 days, according to the White House announcement. Trump issued the orders under powers contained in the 1977 International Emergency Economic Powers Act.

The U.S. administration has been broadening the scope of its crackdown on Chinese tech. This week the State Department published details of a "clean" network initiative to act against Beijing on a number of fronts, from app use to cloud storage.

Issuing the orders, Trump accused TikTok and WeChat in the executive order of being espionage tools for Beijing to spy on the U.S. as they capture huge amounts of user data.

In addition, Trump said both apps are used for propaganda purposes as they reportedly censor "content that the Chinese Communist Party deems politically sensitive and may also be used for disinformation campaigns that benefit the Chinese Communist Party."

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.

"The specific impacts are not yet known and are subject to regulations to be issued by the Commerce Department . . .The restrictions may affect US person's ability to use these apps or result in other, more tailored restrictions," said Nicholas Turner, a Hong Kong-based counsel at law firm Steptoe & Johnson.

"Downloading the app is more likely to be banned because it involves signing a user agreement with the companies, which is a transaction by definition," said Ye Jun, a partner at Chicago-based law firm Getech Law specializing in corporate and patent law.

"It is more difficult to ban the use of the apps. If users already have them on their phones, it is near impossible to ask them to delete or stop using, unless the U.S. can build a 'great firewall' to block them once for all," Ye added.

The latest move by the administration will also put additional pressure on ByteDance to reach a deal with Microsoft. Trump said last week that if TikTok's U.S. operation is not taken over by an American company by September 15, the app will be banned in the country.

TikTok said on Friday: "For nearly a year, we have sought to engage with the US government in good faith to provide a constructive solution to the concerns that have been expressed. What we encountered instead was that the Administration paid no attention to facts, dictated terms of an agreement without going through standard legal processes, and tried to insert itself into negotiations between private businesses."

The company said it would "pursue all remedies available to us in order to ensure that the rule of law is not discarded and that our company and our users are treated fairly – if not by the Administration, then by the US courts."

ByteDance's founder and CEO Zhang Yiming said in an internal company letter on Tuesday that the U.S. government's real goal has always been banning the app instead of "forcing a sale of TikTok".

TikTok has been highly popular among young Generation Z social media users in the U.S., where the app had been installed 180 million times as of early July, according to data from market research firm Sensor Tower, in a country of 328 million people.

While WeChat does not have as broad a user base in the U.S. as TikTok -- of the app's 279 million overseas downloads in the past six years, the U.S. contributed less than 7%, or 19 million -- it is used by many Chinese living overseas as a tool for both personal and business communications.

However, Trump said the Chinese Communist party was using the app to "keep tabs on Chinese citizens who may be enjoying the benefits of a free society for the first time in their lives.

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