Access Alert: President Trump’s WeChat Ban Impact on Business Operations

Access Alert: President Trump’s WeChat Ban Impact on Business Operations

TikTok Ban Gets More Press

On 6 August 2020, U.S. President Donald Trump signed an executive order banning transactions related to messaging app WeChat or with the app’s Chinese owner, Tencent, on 20 September (later extended to 12 November). On the same day, Trump signed a similar executive order banning transactions with ByteDance, the Chinese owner of the popular short-video app TikTok.

The TikTok order immediately drew more attention due to its wild popularity in the US (85 million monthly active users) and President Trump’s vocal support for an American company to buy TikTok’s US operations. While the TikTok order has drawn more attention, the WeChat order is more consequential for U.S. businesses.

But WeChat Ban More Impactful to Business Operations

WeChat may not be as popular as TikTok in the U.S. (19 million active users) but it is used widely by consumers, businesses and governments in China and across Asia for a variety of purposes, including communications, online payments, e-commerce, and news. This makes WeChat a critical tool for American companies’ success in China and other markets across the region.

Impact to Executive Travel and Growth

Tech executives might no longer be able to communicate with their contacts in China using WeChat from the U.S. or when traveling to China for work. Since WeChat is widely used around the world, with over 1.2 billion monthly active users, these problems could also arise for U.S. businesses with global offices that do China-facing business.

Impact to Payments and Consumer Sales

WeChat is an important marketing and payment tool for companies selling products and services in China. It is also essential for customer service. If the Trump administration opts for an expansive interpretation of the executive order’s vaguely worded language, it could prohibit American companies in China and across Asia from using WeChat for these activities, putting them at a disadvantage to their foreign competitors. With WhatsApp and similar foreign apps blocked in China, U.S. businesses would have no American alternative to turn to in the country.

Impact to HR and Talent Recruitment

The WeChat ban could also disrupt U.S. businesses’ operations by cutting off employees’ and executives’ lines of communication with China. Chinese immigrants working for companies in the U.S., for example, might no longer be able to communicate with their friends and families back home. This could lead to a decrease in interest of foreign technical talent to study and begin their careers in the United States.

Why Ban TikTok and WeChat Now?

Both executive order bans are part of a broader Trump administration effort to prevent the Chinese Communist Party from being able to access or manipulate Americans’ data and communications networks. The bans also reciprocate similar prohibitions in China on foreign (often, US) apps and encrypted communications in China.

The Administration’s executive order bans each delegate implementation authority to the Department of Commerce, using the International Emergency Economic Powers Act (IEEPA) as the legal basis for their actions. Also, both are effectively extensions of Trump’s May 2019 Executive Order on Securing the Information and Communications Technology and Services Supply Chain.

How Should Tech Companies Respond?

1) Tech companies should gather as much intelligence about the executive order’s implementing regulations as possible. A final rule implementing Trump’s May 2019 executive order on securing the ICT supply chain, expected for release in the coming weeks, could contain details clarifying the scope of the WeChat ban and its impact on businesses. However, an apparent lack of coordination between the White House and executive agencies, including Commerce, on the WeChat order suggests that the rollout of implementing regulations might not be straightforward.

2) Tech companies should engage administration officials and Congressional representatives with concerns and suggestions. Here are some suggestions for your company:

  • Develop a compelling presentation about the critical role that WeChat plays in your company’s success;
  • Emphasize how a ban on WeChat would hurt your business and adversely impact America’s economic competitiveness and national security;
  • Suggest alternative policy methods to achieve the administration’s national security objectives.

3) Tech companies should monitor the Chinese government’s response to the ban. The Chinese Communist Party may determine that it is in China’s economic interest to spare U.S. businesses in China from retaliation, but companies should take a cautious approach and brace for further tit-for-tat actions which could further complicate operations in China.

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