On Wednesday evening of August 5, millions of users flooded Tiktok in panic as Trump issued an executive order that would ban two large Chinese apps from the U.S. market. WeChat and Tiktok, targeted due to national security concerns, were accused of collecting significant amounts of user data that could exploit U.S. private data for espionage or blackmail. With over 800 million users active, the decision to erase TikTok from U.S. markets lingered ominously over the social media market, and ByteDance, the parent company of TikTok, was cornered: either sell TikTok or face the ban.
What impact can this possibly have on the U.S.-China tech war and the two countries’ overall relationship? If we look beyond the trade and technology war, political tension between the United States and China stretches back as far as 1949, when the People’s Republic of China was established. This relationship has been further strained due to years of conflict over Taiwan’s independence. Only more recently in June of 2015 did the U.S. accuse Chinese hackers of managing an online breach of the Office of Personnel Management, resulting in data theft of 22 million federal employees. With a long history of political tension already set in stone, the problem’s roots only grew to other areas of government.
Tension over trade arose around February of 2012 when the U.S., EU, and Japan filed a “request for consultations” with China concerning their restriction on exporting rare earth metals. They declared China’s trade policy as violating international trade standards, forcing multinational firms to relocate their businesses to China. When China declared this confrontation as “rash and unfair,” eyes were now turned to see how the nation would retaliate. The trade war escalated in March 2018 when Trump enforced high tariffs on Chinese imports, worth $50 million, an attack at the alleged Chinese theft of U.S. tech and intellectual products. China coldly responded by enforcing their own numerous tariffs on U.S. goods, proving concerns of a trade competition between the two largest economies in the world. As recently as 2018, the Trump administration stated that the U.S. will “prioritize competition over cooperation,” a motive that serves to weaken current trade relations.
U.S.-China trade tensions add to the nations’ long race in dominating the tech industry. While IBM and Microsoft drove U.S. technology in the 80s, China was busy preparing the Great Firewall, a censorship function-blocking certain content existing on the internet. With disparate beliefs for tech innovation already present, the tech war kicked off with “Made in China 2025,” a plan to make extreme investments in wireless communications, robots, and microchips. In fact, just last year, China imported $306 billion worth of chipsets or 15% of the country’s total imports. The U.S was determined to limit China’s quick advance into the tech industry, so they have, for more than a year, been pressuring allies to keep Huawei products out of 5G networks. Therefore, President Trump’s banning of TikTok and Huawei from all U.S. markets serves an ultimate purpose: adding fuel to the already blazing fire representing the United States and China’s competitive stance in politics, trade, and technology.
Now knowing TikTok’s connection to the banning of Huawei and the two countries' fast-paced competition over tech industries such as AI, 5G network, etc., what should we expect from the banning of TikTok? It’s most efficient to focus on four educated predictions: first, U.S. tech company profits could see a potential drop due to nationalistic sentiment and China’s powerful presence in the tech market. This is an evident issue that arose when Trump’s banning of Huawei led to semiconductor stocks tanking, along with Chinese consumers collectively protesting Apple products, inflicting on Apple’s sales in China. Second, these U.S. companies will have to choose sides as operating in both markets becomes challenging. In fact, with the U.S. and China being the top largest economies in the world, their dominance will swing other global powers and force top economies to choose a stance. Touching on the more political impacts, the third prediction shows a gradual transition from a global tech landscape to a “splinternet,” where the web is divided along geopolitical boundaries. In application, tech giants like Apple and Google who dominate the web can expect restrictions on how they operate in China, leading to a potential divide. The fourth and last prediction is most clear on a social scale outside politics: American consumers’ emotional connection to tech imports. Despite being a foreign app, TikTok boasts 100 million users from America and has gained massive appeal by fulfilling Generation Z’s need for instant gratification. The emotional connection U.S. users develop with an overseas product provides a powerful social aspect to the scene, which could steer crucial business decisions based on audience and demographic.
Written by: Darveen An
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