The Trump administration's cantankerous relationship with China has lasted the president's entire term, often shaking up the payments and financial services landscape. With a new executive order, Trump has announced bans on more than a half dozen software firms — including payment apps affiliated with Tencent and Alibaba/Ant Group.
Trump's executive order targets Tencent's QQ Wallet and WeChat Pay, as well as Alipay, CamScanner, SHAREfit, VMate and WPS Office. The bans, announced late Monday, will be further defined by the Commerce Department and are scheduled to go into effect during the next 45 days. There are still details that have not been released, but the bans are likely aimed at WeChat and Alipay's U.S. operations, where both companies process "own currency" payments for Chinese shoppers buying from American merchants.
The Trump order specifies national security and data risks as the reason for the bans, contending: "Chinese connected software applications can access and capture vast swaths of information from users, including sensitive personally identifiable information and private information."
Trump and China have battled for most of the past four years. In that time the U.S. has pressured chip maker Huawei and issued threats against WeChat and Tik Tok. These moves have put American firms that do business in China, such as Starbucks and PayPal, at risk of retaliation from China. Trump also issued tariffs on Chinese goods that complicated supply chains and stressed B2B payment flows.
China has also taken a hard line, creating a moving target for U.S. firms that wish to process domestic payments, such as PayPal and U.S.-based card brands, issuing preliminary approvals for years then delaying and adding conditions. China is working on a central bank digital currency that is partly designed to counter the influence of the U.S. dollar and American firms such as Amazon and Facebook, which also mine substantial amounts of consumer data.
Trump's ban comes against a backdrop of domestic political turmoil in both the U.S. and China, complicating any retaliatory move.
Chinese regulators are squeezing Ant, causing the firm to suspend its IPO and deemphasize financial services beyond transaction processing. China's digital currency is also seen as a way to counter WeChat and Alipay's dominance in China, though the Chinese government denies that goal.
In the U.S., Trump's latest ban could complicate the incoming Biden administration's policy toward China, and it could be argued that's part of Trump's goal. While Biden's stance on China is not much different than Trump's, an accelerating trade war and potential retaliation could create extra stress on Biden in future negotiations.
The Alipay and WeChat bans add to a flurry of political drama, coming as Georgia conducts two runoffs that will determine the balance of power in Congress, and the full Congress votes to certify Biden's Electoral College win. A group of Republican members of Congress have vowed to challenge the Electoral College vote, though they have no clear path to do so.
