The TikTok drama betrays increasing political desperation in the U.S.-China showdown
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Secretary of State Mike Pompeo said Sunday that the Trump administration will soon take action against Chinese software companies, like TikTok and WeChat, that present a risk to national security because they are “feeding data directly to the Chinese Communist Party.”
“President Trump has said ‘enough,’ and we are going to fix it,” Pompeo told Fox News.
Pompeo’s comments followed an odd sequence of events surrounding TikTok, a popular video app owned by a Chinese company, Bytedance. (If you are not a TikTok user, no worries. You can get the gist of it here, and then go on with your life.)
On Friday, President Trump said he was considering banning the app from the U.S. Fox Business reported that Microsoft was in talks to buy the U.S. operations of TikTok, which would both solve the national security concern and enhance Microsoft’s role in social media. (The software giant bought LinkedIn in 2016.) The Wall Street Journal confirmed that story, and put it in the lead position on Saturday’s print front page.
But then late Friday, flying back to Washington from a campaign rally in Florida, the President told reporters that he didn’t support the Microsoft deal, and instead intended to ban the company from operating here. “I have that authority.” Talks with Microsoft were put on hold.
Then, on Sunday, Microsoft said it is “prepared to continue its discussions” with ByteDance over the TikTok buy. Bytedance CEO Zhang Yiming told employees no final decisions have been made. Chinese media is comparing the potential sale with “forcibly taking the child out of Bytedance’s arms.”
TikTok has taken steps to paint itself as an American brand, hiring a former Disney executive, Kevin Mayer, as CEO. And it is on a hiring spree in the U.S. A sale to Microsoft could be priced at as much as $50 billion, investors say. A ban would cause much of that value to evaporate.
Perhaps the president is trying to get Microsoft a better deal? Perhaps he’s negotiating with China for something else? In any event, his position is at odds with Secretary Pompeo and Treasury Secretary Mnuchin, who reportedly support the Microsoft deal.
Stay tuned on this one. The U.S.-China showdown seems to be taking on an ever-deepening hue of political desperation. That’s not a route to good policy.
More news below.
Despite the global downturn, the output of Chinese factories continues to grow–in fact, the manufacturing sector last month saw its fastest expansion in nearly eight years. Caixin Insight Group senior economist Wang Zhe: "Flare-ups of the epidemic in some regions did not hurt the improving trend of the manufacturing economy, which continued to recover as more epidemic control measures were lifted." Fortune
Marathon Petroleum will sell its gas-station chain to Tokyo-based Seven & I Holdings, the owners of 7-Eleven. The all-cash agreement is worth $21 billion. Seven & I president Ryuichi Isaka: "This was the chance of a lifetime." The talks have been underway for some time, though they temporarily fell apart when the pandemic hit. Wall Street Journal
Siemens Healthineers is shelling out around $16.4 billion to buy Palo Alto-based Varian Medical Systems. The move will give the German health-tech outfit a foothold in the cancer-treatment market and, with Siemens's stake in the spin-off being diluted as part of the financing arrangement behind the deal, Healthineers CFO Jochen Schmitz says it may now list on the DAX. Bloomberg
Those weird packs of seeds sent from China to U.S. citizens who didn't order them? At least some of them have been identified by the U.S. Department of Agriculture, including rosemary, sage, mint, mustard, cabbage, lavender, hibiscus and rose. The official advice remains not to plant them. Fortune
AROUND THE WATER COOLER
As the pandemic forces most airlines into retreat, Ireland's Ryanair is planning to grab their business. Fortune's Shawn Tully estimates that CEO Michael O'Leary's blueprint will leave Ryanair as much as a third bigger within the next five years. The strategy: "Driving the expense base to levels that create an enduring competitive advantage that enables Ryanair to soar in the recovery while rivals remain stuck on the tarmac." Fortune
Crime and poverty
Former congressman Gary Franks—a Black Republican—writes for Fortune that Alexandria Ocasio-Cortez is right to maintain there is a clear connection between poverty and petty crime. He posits that this could be fixed by enforcing existing anti-discrimination laws so companies who do not employ Black and Hispanic people at all levels of the organization will stop receiving federal funds. Fortune
The Financial Times has a worrying piece on the increasingly apparent longer-term effects of COVID-19. Many people who have recovered from the initial sickness find themselves continually afflicted by extreme fatigue, a foggy brain and other symptoms. COVID-19 survivor Ondine Sherwood: "The government has to wake up and realise we might be dealing with a really big problem here, affecting hundreds of thousands." Financial Times
Iranian authorities appear to have covered up the true toll of the coronavirus there. The BBC's Persian service found the government's own records show Iran's case count to be 451,000 and death toll to be 42,000—its official count is 279,000 cases and 14,400 deaths. Iran's first COVID-19 death was on January 22, almost a month before the first official report of any case. BBC
This edition of CEO Daily was edited by David Meyer.