The moves to ban the apps represent an “unprecedented intervention by the US government in the consumer technology sector,” according to Paul Triolo, head of geotechnology at Eurasia Group, a political risk consultancy.
It also marks the first time the government “has attempted to ban a software application running on millions of mobile phones” in the United States, Triolo wrote in a note on Friday.
A WeChat ban would be a blow to the Chinese diaspora, students and others in the United States who rely on the app to communicate with family, friends and business partners in China.
WeChat is the overseas version of Tencent’s widely popular Chinese messaging app Weixin. The app provides a range of services, including instant messaging and the ability to send money to other users.
According to the order, a ban would apply to “any transaction that is related to WeChat” made by any person or “any property” subject to the jurisdiction of the United States.
Tencent “is reviewing the executive order to get a full understanding,” a company spokesperson said.
The Shenzhen-based firm reported in March that Weixin and WeChat have nearly 1.2 billion monthly active users. The company does not disclose user numbers by country, but industry analysts say the vast majority of them are on Weixin in China.
The flurry of executive orders have “spooked Asia,” wrote Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, in a Friday note.
“It highlights the challenges Chinese companies will have, emerging internationally from behind the great firewall of [China’s] protective cocoon,” he added.
Trump’s ban is so far mostly symbolic, given the small market share WeChat has in the United States.
But if it expands into popular gaming apps operated by Tencent, that could be a problem.
More than half of Tencent’s revenue last year came from so-called Value Added Services (VAS), which include the company’s lucrative portfolio of online games. Financial services and payment apps such as WeChat Pay contributed about 25% of revenue, and just under 20% came from online advertising.
Tencent operates many popular mobile gaming apps, such as PlayerUnknown’s Battlegrounds, or PUBG. US-based players spend a lot of money in PUBG — it ranked 10th in the United States by consumer spend last year, according to analytics company App Annie.
Tencent could lose the United States as a market for its mobile games if the ban on Chinese apps is expanded, which appears to be the Trump administration’s intent.
US Secretary of State Mike Pompeo on Wednesday said that “untrusted Chinese apps” should be removed from US app stores. He did not provide further detail as to how the sweeping restrictions would be implemented, or whether they would require the support of private companies.
Trumps executive orders would “at a minimum … force US app store providers Apple and Google to remove both apps after the 45 day period,” according to Triolo.
What remains unclear is if Apple and Google’s app stores in China would also have to remove the apps after 45 days, given the fact that they are operated by US companies.
“Given that WeChat has become a critical part of everyday life and commerce in China, such a move would likely also be cataclysmic for Apple’s business in China — without Weixin available on the iPhone, for example, sales would likely plummet,” Triolo said.
Graham Webster, China Digital Economy Fellow at Washington-based think tank New America, doubts the bans will even be implemented.
“There are real privacy and cyber concerns with Chinese companies using apps, but this is not what’s going on. If you wanted to deal with that, you’d have a much broader and more technical approach,” Webster said.
“I could see intense lobbying on the part of US businesses. People are going to push back on this and the administration has a history of delaying and modifying” this kind of rhetoric, he added.
— Selina Wang contributed to this report.