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 ahead of an expected statement Friday by President Donald Trump on whether or not the government will approve a deal for Oracle to take a minority stake in TikTok and become a “trusted technology partner” for the company in the U.S.
It’s unclear if the Commerce Department’s announcement means there’s no possibility of a deal going through before the Sunday deadline. 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.
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 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. It’s unclear how functional TikTok will be if someone has it installed on their device before it’s removed from app stores after midnight Sunday.
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.
Representatives for Tencent, TikTok, WeChat, Apple and Google were not immediately available to 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.
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.
–CNBC’s Alex Sherman and Amanda Macias contributed to this report.
