Compass Money: Trump to TikTok and WeChat – You’re Fired

The Trump administration issued regulations on Friday barring downloads and updates for WeChat and TikTok in U.S. app stores after midnight on Sunday. The actions follow President Trump’s executive order in August stating that the administration will ban both apps due to national security concerns. However, TikTok could avoid being banned if it divests its U.S. operations. The administration claims that both apps pose a security threat because the data that they collect from U.S. consumers could be shared with the Chinese government. Chinese law requires that Chinese citizens share data with their government if asked. 

The new regulations prevent downloads or updates for the Chinese-owned apps TikTok and Wechat after 11:59 p.m. Sunday. U.S. companies will also be banned from providing data hosting services for WeChat. Money transfers through the WeChat app will also be blocked for U.S.-based users. 

The regulations include two key concessions. The administration will allow U.S. companies to continue providing web-hosting services for TikTok through Nov. 12, amid talks to create a new U.S.-based owner. The administration will also allow U.S. companies to continue using WeChat outside of the U.S.—including in China, where the multipurpose app is used for mobile payments, messaging, and marketing. 

Should the ban extend to China, nine out of 10 companies surveyed by the American Chamber of Commerce in Shanghai said the ban would hurt their Chinese operation, as U.S. brands rely on WeChat to reach and collect payments from their Chinese customers.

The administration expects some users will find ways to continue using the apps, and it does not intend to prosecute anyone for doing so. “We’re not going to haul some person using WeChat to communicate with persons overseas before a federal judge,” the official said.

However, the aim is to decrease the use of the apps over time by reducing app functionality. Without updates for bug-fixes or security, users will experience slow speeds to the point of timing out, so while the services might still be technically usable, they won’t be very functional after Sunday night, officials said. 

This would impact TikTok’s 50 million and WeChat’s 3.5 million active U.S. users. While TikTok is popular among teenagers who post short dance videos, WeChat serves as a significant conduit for Chinese-Americans to communicate with relatives and friends in China.

Meanwhile, TikTok is working to create an ownership structure that would give U.S. interests a majority stake to ease the Trump administration’s security concerns. Under the latest plan, U.S. companies Oracle Corp. and Walmart Inc. could own a significant stake, which could put majority ownership in U.S. hands. 

TikTok’s board in the U.S. would include only government-approved members, including one independent member with expertise in data security. As an extra security precaution, Oracle would also be able to review the app’s source code and subsequent updates for security vulnerabilities. 

The situation is highly fluid, and the final terms of any deal remain unclear.