Trump’s WeChat executive order sends shares of Tencent parent on wild ride

President Donald Trump on Thursday signed two executive orders restricting U.S. operations of Chinese-owned social media platforms TikTok and WeChat, citing national security concerns.

The orders will take effect in 45 days. Their scope is not yet clear, but according to the text of the twin orders, they will prohibit U.S. individuals and companies from involvement in “any transaction that is related to WeChat” or TikTok’s Beijing-based parent company ByteDance.

Shares in Tencent Holdings, the owner of WeChat, had plunged 6.8% by midday—their biggest drop in two years—after news of the executive order and speculation that the restrictions would affect a wide range of gaming and social media companies in which Tencent has a stake. At one point, the share slump took as much as $46 billion off of Tencent’s market value.

A U.S. official later clarified that the restrictions will only apply to WeChat, not Tencent’s other properties, which saw Tencent shares recover some losses. Tencent’s wide-ranging investment portfolio includes stakes in U.S. forum site Reddit and in the companies that developed gaming sensations like Fortnite and League of Legends.

TikTok did not immediately respond to an emailed request for comment. A Tencent representative declined to comment.

TikTok, which is owned by Beijing-based tech firm ByteDance Ltd, could be exempted from the restrictions if a Microsoft Corp purchase deal goes through. If it doesn’t, and the Trump administration bans the app, it will apply to U.S. users but will not affect consumers in China, where a local version of the app called Douyin is available.

But a ban on WeChat, it seems, would have a more global reach, as it is a vital communication tool for users in the U.S. and China. Overseas Chinese and members of the Chinese diaspora use WeChat talk to their relatives and friends in the mainland, where many other social messaging platforms like Facebook and Whatsapp are blocked by government Internet controls. WeChat is widely used by American firms in China to make deals and communicate with employees and customers.

WeChat’s in-app mobile payment platform, WeChat Pay, is ubiquitous in China, and some retailers in the U.S. offer it too; its ‘red envelope’ function is a common way for Chinese students and young professionals in the U.S. to receive traditional Chinese New Year cash gifts from relatives in China.

U.S. Secretary of State Mike Pompeo on Wednesday told U.S. companies to remove “untrusted” Chinese apps, including TikTok and WeChat, from U.S. app stores, saying the apps threatened U.S. users’ data security. TikTok and WeChat have denied that the Chinese government has access to U.S. user data, and both companies store U.S. user information on servers outside of mainland China.

The executive orders represent “an unprecedented intervention by the U.S. government in the consumer technology sector,” Eurasia Group analyst Paul Triolo wrote in a Friday Eurasia Group briefing. They also mark “the first time the U.S. government has attempted to ban a software application running on millions of mobile phones within the U.S.”

One question raised by the order, Triolo wrote in the report, is whether the mainland China versions of Apple and Google app stores will also be required to remove the apps. TikTok isn’t available on the mainland but for WeChat, or Weixin, as it’s called in China, “this would be a major disruption for one of the most widely used of China’s social media apps and could severely disrupt Apple’s business in China.”

More must-read international coverage from Fortune:

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  • The U.K. lifted border controls just as COVID took off. Lawmakers call this “a serious error”
  • China’s U.S. energy imports are 95% below what it promised in the Phase One trade deal
  • Google faces EU antitrust probe over the data implications of its Fitbit buy
  • COVID-19 is killing journalists in prisons, compounding the threat of attacks on the press

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