“We are shocked by the recent Executive Order, which was issued without any due process”, TikTok said, in a blog post responding to Donald Trump’s latest broadside, which also found The White House taking aim at WeChat and parent Tencent.
“For nearly a year, we have sought to engage with the US government in good faith”, TikTok continued. “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”.
Trump this week suggested he wants the US to get a cut of any deal involving the sale of TikTok to a US company. It’s still unclear under what authority he can make such a demand.
Trump’s orders (plural), issued late Thursday evening in the US, hit Tencent shares hard in Asian trade. The stock — which comprises 6% and 4% of MSCI’s emerging market and AsiaPac gauges, respectively, shed nearly $35 billion in market cap.
Headed into Friday, Tencent was the eighth-largest company in the world by market cap. The shares, which fell some 5%, suffered one of their worst five days in more than a year. They were down as much as 10% before the US “clarified” Trump’s order to say that, for now, the ban only applies to WeChat. According to a US official, the order will prohibit transactions related to WeChat with the app’s owner and subsidiaries, but not other transactions.
The Hang Seng dropped 1.6%. The yuan fell the most in two weeks.
Although risk appetite clearly suffered, traders were awaiting payrolls stateside and the next move on fraught stimulus talks.
“Markets are shrugging off tech tensions, despite the fundamental global schism this implies, because most in Western markets don’t use WeChat”, Rabobank’s Michael Every, who has long warned of a “Cold War 2.0” scenario, said Friday.
“They are also naturally ignoring any thought of war — unless gold and bond yields are telling us something on that front”, he added, before cautioning that “markets may wake up when the US-China split gets to capital”.
Later, Germany’s Federal Office for Information Security said a check of the iOS version of TikTok showed some of the data movement between the app and servers wasn’t encrypted, potentially allowing for manipulation. TikTok said the problem was fixed.
Regulators this week took more steps down the road towards instituting stricter requirements for Chinese listings in the US, a push that could ultimately mean booting companies from exchanges.
Meanwhile, Chinese exports fared much better than expected last month, data out Friday showed. Exports jumped 7.2% YoY, versus expectations for a small decline. Imports fell 1.4%, against forecasts for a rise, leaving a $62.33 billion surplus.
“In short, China was a net drag on global growth as it bought less from everyone and sold far more — a mercantilism that will increase global protectionist pressures beyond pharma products”, Rabobank’s Every said.
Amusingly, shipments to the US surged 12.5% last month, the most since 2018. That could well be evidence of panicked front-loading given the rapidly deteriorating Sino-US relationship.
The two sides will meet later this month to assess the progress on the trade deal. You’re reminded that China is nowhere close to making good on its year-one commitments. Joe Biden recently called the deal a failure.
Commenting further on Trump’s executive orders Friday, TikTok warned that The White House “risks undermining global businesses’ trust in the United States’ commitment to the rule of law, which has served as a magnet for investment and spurred decades of American economic growth”.
It’s worth noting that even Mark Zuckerberg, who opportunistically launched a TikTok clone (“Reels”) this week and who last month implicitly took aim at the company during congressional testimony, at least feigned concern during a company meeting.
“I certainly think there are valid national security questions about having an app that has a lot of people’s data that follows the rules of another country, a government that is increasingly seen as a competitor”, BuzzFeed cited Zuckerberg as saying. “I just think it’s a really bad long-term precedent, and that it needs to be handled with the utmost care and gravity whatever the solution is”, he continued. “I am really worried it could have long-term consequences in other countries around the world”.