Advertisement
U.S. markets open in 8 hours 1 minute
  • S&P Futures

    5,208.50
    -6.25 (-0.12%)
     
  • Dow Futures

    39,211.00
    -12.00 (-0.03%)
     
  • Nasdaq Futures

    18,183.00
    -48.50 (-0.27%)
     
  • Russell 2000 Futures

    2,047.40
    -2.40 (-0.12%)
     
  • Crude Oil

    82.58
    -0.14 (-0.17%)
     
  • Gold

    2,162.10
    -2.20 (-0.10%)
     
  • Silver

    25.27
    +0.01 (+0.04%)
     
  • EUR/USD

    1.0870
    -0.0007 (-0.07%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • Vix

    14.33
    -0.08 (-0.56%)
     
  • GBP/USD

    1.2714
    -0.0014 (-0.11%)
     
  • USD/JPY

    150.3120
    +1.2140 (+0.81%)
     
  • Bitcoin USD

    64,956.62
    -3,808.84 (-5.54%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,722.55
    -4.87 (-0.06%)
     
  • Nikkei 225

    39,914.18
    +173.78 (+0.44%)
     

Trump exec orders effectively ban TikTok, WeChat

Freshfields Bruckhaus Deringer Partner & Former Chair of CFIUS Aimen Mir joins Yahoo Finance’s Akiko Fujita and Kristin Myers to discuss how President Trump's executive orders effectively ban two major Chinese apps from the U.S. market.

Video Transcript

KRISTIN MYERS: Well, President Trump has signed an executive order, banning social media giant TikTok in the United States, citing security concerns. Now TikTok has vowed to fight that ban saying in a statement, quote, "we are shocked by the recent executive order, which was issued without any due process. We will pursue all remedies available to us in order to ensure that the rule of law is not discarded and that our company and our users are treated fairly, if not by the administration, then by US courts."

So for more on this, we're joined now by Aimen Mir. He's a partner at Freshfields Bruckhaus Deringer and also a former staff chair of CFIUS. We're also joined now by Yahoo Finance's Akiko Fujita. So Aimen, I want to start with you. The president signed this executive order, of course, citing that national security concerns. This is not the first time the president has had a Chinese company in his sights. I'm thinking of Huawei here.

So how should the United States going forward be approaching any risk as it relates to China?

AIMEN MIR: So there clearly is a long history of US government concern now with China. And the question really for the US government's part is, how aggressive to be in order to try to close the gap between what the government is comfortable with-- because there's always risks out there and really the question becomes, how aggressive are you going to be to achieve the goals that you're trying to achieve without overstepping.

And by overstepping, I mean having unintended negative consequences for US businesses, having unintended security consequences because sometimes taking aggressive action may produce a response that in itself has security consequences and pushing away allies whose assistance we need. So there's a very fine balance that the government has to try to strike.

And obviously this administration is, especially now, taking a very particular approach to that is at this point quite aggressive and has been increasingly aggressive over at least the rhetoric over the past few weeks. And there have been a number of actions that the government has taken to back that up as well.

AKIKO FUJITA: Aimen, we know that TikTok has been under CFIUS review since last fall. But I'm curious what your thoughts are on this executive order with WeChat. This is a company that never went through a review. It has a much smaller footprint in the US. But it's a crucial line for a communication line for Chinese expats abroad but also US businesses that use the app to communicate with supply chains, to communicate with other customers to market their products as well. How does the government reconcile the national security concerns with the US business interests?

AIMEN MIR: That's a good question. And one of the questions is, of course, everybody anticipated some action related to TikTok. The WeChat action was a little bit less anticipated. And there was a question as to what the thinking was behind it, how well formulated the policy is, how well understood the consequences are.

And these orders are, in their form and their justification on their face, are atypical. They don't align with the types of orders that have used this particular International Emergency Economic Power authority in the past. And so the hope is that the government has considered those issues.

But clearly, they're very ambiguous and they leave a lot to the secretary of commerce to define in terms of what their actual scope will be and who will actually be affected. And so unfortunately, we're in a wait and see approach. The orders themselves are very broad, but presumably the actual implementation will be more focused.

AKIKO FUJITA: When you look at how CFIUS has responded before, they have unwound deals in the past, whether it's in financial and MoneyGram. We've seen that with Grindr as well. Now TikTok. Is this still all about a tech issue? Or are we going to see further scrutiny on healthcare or biotech? I mean, does it really come down to just anything that's related to China CFIUS is going after?

AIMEN MIR: Well, there are concerns, and there are legitimate concerns in a whole range of areas where there are national security impacts. I think we can be confident for the time being that CFIUS will continue to focus on national security. I don't know what CFIUS sent to the president, but I'm really relatively confident that CFIUS continues to follow its established methodology for every transaction to identify a national security concern.

Now the real question when you're talking about necessarily concerns is, once you've identified them, what do you do about it because there are three options that you have. One is you accept the risk. The second is you take actions to try to manage or reduce the risk. And the third is you try to go after the very source of the risk and to try to cut out the risk.

And historically, you try to aim for that middle ground. You address the risk by imposing conditions on the transaction and allowing it to go through. But whether you go that route or you block the transaction depends upon how much risk you're willing to accept. And how much risk you're willing to accept is dependent upon a whole range of geopolitical, political, economic factors. And the simple fact is that, over the past few years, the incentive to accept any risk has diminished significantly.

So I think for the time being on areas where CFIUS identifies a national security risk, which it's a pretty broad set of potential areas, the appetite for accepting risk and allowing transactions to go through is going to be much lower than it might have been in the past.

AKIKO FUJITA: And Aimen, away from CFIUS, since you've stepped away, I know you consult with a lot of companies that are looking to invest in the US. How concerned are you about the message this kind of scrutiny sends to a lot of companies who are looking to the US saying, well, maybe things aren't open for business for us? I mean, have you started to see a lot of companies who are maybe thinking twice about investments in the US because they're worried about getting flagged by CFIUS?

AIMEN MIR: So from a business perspective, high on your list of priorities is predictability. You need to have a predictable environment. You need to know whether or not your transactions is going to be reviewed. You need to have some sense of the basis for any decision that the government may take. And once you have a sense of those factors, you can price that into your deal. You can decide whether or not you want to take that risk.

I think the challenge now is not that the US government is being aggressive towards Chinese investment. It's that it's very difficult to predict day by day what measures the government may take with respect to any given issue. And that environment inherently diminishes the willingness of companies to expose themselves or put themselves to invest.

So I think that, in the long term, that's problematic. So it's not necessarily the focus on addressing national security issues. It's making sure that there's clarity, that you're focusing on national security if you're CFIUS, you're not conflating it with issues that are not national security, because once you start doing that, people start losing trust in that predictability and the confidence in the system.

KRISTIN MYERS: And Aimen, following on that, looking more broadly, what does this mean for US China relations going forward? It seems that we're ratcheting up tensions. We still don't have a trade deal in place.

AIMEN MIR: Yeah, I mean, there appears to have been a very deliberate effort in the past few weeks. And if you look at Secretary Pompeo's series of speeches to ramp up the pressure and to do a full court press on a number of areas. So at the moment, it looks like the administration is pushing in a number of areas to try to increase the pressure on the Chinese government limit areas where there is a perception of a vulnerability in the US. And my guess is that we haven't seen the last of it, certainly not for the next couple of months.

KRISTIN MYERS: Aimen Mir, former staff chair of CFIUS and a partner at Freshfields Bruckhaus and Deringer. And of course, thank you as well to Yahoo Finance's Akiko Fujita.

AIMEN MIR: Great, thanks.

Advertisement