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Why Trump's TikTok Ban Could Be 'Fort Sumter Moment' In Cold Tech War Between US, China

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Why Trump's TikTok Ban Could Be 'Fort Sumter Moment' In Cold Tech War Between US, China

The drama over the fate of popular Chinese-owned social media platform TikTok is ongoing Friday, with the U.S. Commerce Department announcing that it will ban U.S. business transactions on TikTok starting Sunday.

What Happened? Chinese-owned TikTok and WeChat will seemingly no longer be able to do business in the U.S. starting on Sunday, presumably unless the two companies announce deals with U.S. companies that gain the approval of President Donald Trump.

Why It’s Important: TikTok has taken the U.S. by storm in 2020, and the app now has more than 100 million users.

Trump has pushed for TikTok’s parent company ByteDance to sell the platform to an American company due to national security concerns.

ByteDance was reportedly seeking a $30-billion valuation for TikTok in buyout negotiations, but the company recently rejected a bid from Microsoft Corporation (NASDAQ: MSFT) and partner Walmart Inc (NYSE: WMT).

On Monday, TikTok announced a deal proposal to add U.S. company Oracle Corporation (NYSE: ORCL) as a “trusted technology partner,” pending Trump’s approval.

The word from the Commerce Department on Friday suggests the Oracle deal failed to satisfy Trump.

Sunday reflects a deadline Trump set via executive order back on Aug. 6 that gave ByteDance and WeChat parent company Tencent Holdings ADR (OTC: TCEHY) 45 days to sell their U.S. businesses to American companies or face bans.

Trump has said he is concerned about the degree to which the apps give the Chinese government access to American users’ data.

What It Means: The Commerce Department’s directive on Friday would ban Apple, Inc. (NASDAQ: AAPL) and Alphabet, Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL) from listing the TikTok and WeChat apps in their app stores.

The statement also bans U.S. companies from providing internet hosting and services to TikTok starting on Nov. 12 — language that might specifically address at the potential Oracle deal.

TikTok's interim CEO even called on Facebook's (NASDAQ: FB) Instagram to join the fight.

On Friday, Wedbush analyst Daniel Ives said he still believes a deal can be reached in the next 48 hours to prevent bans of TikTok and WeChat.

Both the U.S. and China potentially have a lot riding on this game of high-stakes poker, the analyst said.

“The broader worry is that if a deal is not reached over the next 48 hours with approval by the Chinese government around source code access and majority ownership, this shutdown move could be a Fort Sumter moment in the US/China cold tech war tensions with retaliation on the horizon,” he said.

Benzinga’s Take: Trump seems to be willing to anger American TikTok users in his efforts to crack down on China and preserve national security.

Fox Business reports that 15% of TikTok users will be first-time voters in November, but a recent NBC News/Wall Street Journal poll suggests voters under the age of 40 are overwhelmingly already supporting Trump’s opponent Joe Biden in the polls by a more than 20% margin.

Related Links:

'Partnership Better Than Acquisition': Analysts React To Oracle-TikTok Deal

How TikTok's Value Per User Compares To Facebook And Other Social Media Platforms

Latest Ratings for ORCL

DateFirmActionFromTo
Nov 2020KeyBancInitiates Coverage OnOverweight
Oct 2020UBSInitiates Coverage OnNeutral
Sep 2020RBC CapitalUpgradesSector PerformOutperform

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