The Commerce Department announced Friday morning that it will ban U.S. business transactions with Chinese-owned social apps WeChat and TikTok on Sunday.
The announcement comes as the Trump administration continues to look at a deal in which Oracle would take a minority stake in TikTok and become a “trusted technology partner” for the company in the U.S.
When asked about the TikTok deal during a press conference Friday afternoon, President Donald Trump said it could happen “quickly,” and pointed to the U.S. companies involved, like Oracle. He also brought up Microsoft as a bidder, even though Microsoft said it backed out of the deal last Sunday after its bid was rejected.
The Commerce Department’s announcement leaves room for a deal to go through before the Sunday deadline, and it could be an aggressive move from the Trump administration to push for its original intention to force TikTok to become fully owned by a U.S. company.
“At the President’s direction, we have taken significant action to combat China’s malicious collection of American citizens’ personal data, while promoting our national values, democratic rules-based norms, and aggressive enforcement of U.S. laws and regulations.” Commerce Secretary Wilbur Ross said in the announcement.
The department’s move is an enforcement of Trump’s original executive order from Aug. 6 that gave TikTok 45 days to sell its U.S. business to an American company or face a ban in this country. The end of the 45-day period is Sunday. WeChat, one of the world’s most popular social messaging apps, is owned by the Chinese company Tencent. TikTok’s parent company is Beijing-based ByteDance. Trump’s executive order cited national security concerns over the Chinese government’s access to user data in those apps to justify the potential ban.
A picture of U.S. President Donald Trump is seen on a smartphone in front of displayed Tik Tok and WeChat logos in this illustration taken September 18, 2020.
Dado Ruvic | Reuters
The Commerce statement said that starting Sunday, U.S. companies will be banned from distributing WeChat and TikTok, meaning the two major mobile app stores run by Apple and Google will have to remove the apps from their libraries. The statement also blocks U.S. companies from providing services through WeChat “for the purpose of transferring funds or processing payments within the U.S.”
But the announcement also lays out a separate time frame specific to TikTok, giving it until Nov. 12 to resolve the U.S. national security concerns. The rules that start Nov. 12 include provisions that block U.S. companies from providing internet hosting and services for TikTok. This could be directed at the deal being negotiated between TikTok and Oracle, which would provide cloud services for TikTok if Trump approves, and could give TikTok and Oracle more time to hammer out a deal that will satisfy the president.
In an interview with Fox Business on Friday, Ross said the bans will affect TikTok and WeChat differently at first. He said TikTok will still function, but users will not be able to upgrade the app.
“It’s not doing the same thing to TikTok as to WeChat,” Ross told Fox. “As to TikTok, it’s just upgrades, maintenance things like that, that would be shut down at this stage. The real shutdown would come after Nov. 12 in the event that there is not another transaction. So it’s very different how the way the two are being handled.”
Commerce Department officials who spoke with reporters on the condition of anonymity Friday slightly contradicted Ross’ statements on Fox Business and said neither TikTok nor WeChat will be available to download as of midnight Sunday.
The officials also said that WeChat may continue to function for users who have it installed on their devices, but there may be problems since WeChat uses services run by U.S. companies to deliver data in the app. The officials said TikTok will still function after Sunday if you already have it on your device, but it will cease to function after the Nov. 12 deadline unless a deal is reached before then or Trump rescinds his executive order.
WeChat is a popular marketing and sales tool for U.S. companies primarily in China, but around the world as well. With U.S. social apps like Facebook and Instagram banned in China, WeChat is the primary app people use for social networking and e-commerce. It’s also popular with people in the U.S. to communicate with people in China, since U.S. apps are banned in China.
TikTok’s Nov. 12 deadline is more than a week after the Nov. 3 presidential election, meaning Trump won’t be accused of banning a popular app used by 100 million Americans before they cast their votes. In an interview posted on Snapchat last month, Trump confidant Sen. Lindsay Graham, R-S.C., said he urged the president not to ban TikTok.
In an emailed statement, TikTok said it had already made numerous concessions to address security concerns raised by the Trump Administration, including choosing a U.S. company to host its data and services.
Here’s the full statement from TikTok:
We disagree with the decision from the Commerce Department, and are disappointed that it stands to block new app downloads from Sunday and ban use of the TikTok app in the US from November 12. Our community of 100 million U.S. users love TikTok because it’s a home for entertainment, self-expression, and connection, and we’re committed to protecting their privacy and safety as we continue working to bring joy to families and meaningful careers to those who create on our platform.
In our proposal to the U.S. Administration, we’ve already committed to unprecedented levels of additional transparency and accountability well beyond what other apps are willing to do, including third-party audits, verification of code security, and U.S. government oversight of U.S. data security. Further, an American technology provider would be responsible for maintaining and operating the TikTok network in the U.S., which would include all services and data serving US consumers. We will continue to challenge the unjust executive order, which was enacted without due process and threatens to deprive the American people and small businesses across the US of a significant platform for both a voice and livelihoods.
A Tencent spokesperson told CNBC in a statement that it would continue its discussions with the U.S. government to find a way to keep WeChat functioning in the U.S.
Here’s the full statement from Tencent:
We are reviewing the latest announcement from the Department of Commerce restricting the use of WeChat by U.S. users.
WeChat was designed to serve international users outside of mainland China and has always incorporated the highest standards of user privacy and data security.
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.
The restrictions announced today are unfortunate, but given our desire to provide ongoing services to our users in the U.S. — for whom WeChat is an important communication tool — we will continue to discuss with the government and other stakeholders in the U.S. ways to achieve a long-term solution.
Representatives for Apple and Google did not respond to requests for comment.
TikTok’s interim boss Vanessa Pappas, in a reply to Instagram CEO Adam Mosseri, called on Facebook to join its lawsuit against the U.S., which claims the company wasn’t allowed due process ahead of a ban. Mosseri told CNBC last week that a TikTok ban would be bad for Instagram and Facebook, since it would lead to a country-by-country regulation of the internet.
Meanwhile, no final decision has been made on the Oracle-TikTok deal, and all parties are still hashing out how the technology and ownership structures of the deal will look, CNBC’s Eamon Javers reported Friday, citing a senior administration official. So there’s still a chance for TikTok to survive Trump’s executive order, but WeChat is considered dead in the U.S., according to the official. The Committee on Foreign Investment in the United States (CFIUS) has not formally met on the TikTok-Oracle deal either.
How the TikTok deal changed
Since Trump’s Aug. 6 order, there has been a mad dash to complete a deal to sell TikTok’s businesses in the U.S., Australia and New Zealand to a U.S. company before the Sept. 20 deadline. Microsoft was widely believed to be the top contender and eventually partnered with Walmart on its bid. Oracle was also a top bidder and Google along with SoftBank considered a bid along with Walmart, CNBC previously reported.
But just days before TikTok intended to announce it had selected a buyer, China updated its technology export rules to include artificial intelligence algorithms like TikTok uses. That meant that ByteDance would need a license from China before it could sell TikTok to a U.S. company.
Since then, deal negotiations evolved from a full sale of TikTok’s U.S. business to selling a minority stake in the company to a U.S. firm that would host the app’s data. Microsoft announced Sunday night that it was backing out of a potential deal, and Oracle confirmed on Monday that its offer would make it a “trusted technology partner” for TikTok.
According to people familiar with the situation, Walmart has joined Oracle’s bid. Oracle would get less than a 20% stake in the company based on its current bid. TikTok has indicated that it would also go public on U.S. markets in about a year, although that’s not part of the formal deal, according to sources familiar with the matter.
In addition to the U.S. moves, China must review any deal for TikTok. China has not signaled either way if it would approve the deal, Javers reported, citing the senior administration official.
–CNBC’s Alex Sherman and Amanda Macias contributed to this report.