The announcement resembled a dedication to some old-world monarch. “Microsoft fully appreciates the importance of addressing the President’s concerns,” it said.
“Microsoft looks forward to continuing dialogue with the United States Government, including with the President,” it went on. Then the cherry on top: “Microsoft appreciates the US Government’s and President Trump’s personal involvement.”
So read the company’s notice that it would press forward with negotiations to buy TikTok, the Chinese viral video app that came alarmingly close to a total US ban last weekend. An eleventh-hour conversation between Trump and Microsoft’s chief executive, Satya Nadella, revived the chance of a deal – and Microsoft was clearly keen to give Trump his due.
But if the President’s forceful personal intervention raised eyebrows among business leaders, that was nothing to his next proposal. “A very substantial portion of that price is going to have to come into the Treasury of the United States, because we’re making it possible for this deal to happen,” he told reporters.
“Right now they don’t have any rights unless we give it to ’em. It’s a great asset, but it’s not a great asset in the US unless they have the approval of the US.”
Trump’s nakedly transactional tone – as well as his apparent ground assumption that any corporate deal in a free market economy should be subject to his personal veto – constitutes a new level of intervention in tech markets, theoretically going far beyond cases where national security is at stake.
Matt Levine, a columnist for Bloomberg, summarised Trump’s message as “America: we will expropriate the assets of foreign companies if someone pays us a big enough bribe.”
That raises pressing questions for any tech firm hoping to receive investment from or be acquired by foreign companies.
‘Medieval’
Will all future overseas deals require them to kiss Trump’s ring as Microsoft did? And if so, given the President’s mercurial negotiating methods, will they be worth bothering with at all?
“It really does hark back to medieval times,” says Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington DC, who described Trump’s treatment of TikTok as highly unusual in American history.
As a US Treasury official in the 70s, Hufbauer oversaw the creation of the Committee for Foreign Investment in the US (CFIUS) – a powerful “star chamber”, which last year ordered the gay dating app Grindr to be sold by its Chinese owner, and which would probably have been Trump’s lever for ejecting TikTok from the country.
“These days taxes paid to the government are a matter of statute,” he says. “The notion that suddenly the president can say to a company ‘well, there’s no statute, but you should pay some ransom to the Treasury, because you couldn’t do this unless I had given permission’ – well, it’s been a long time since we’ve seen that in the world.”
Plenty of past and potential foreign deals could fall under such a policy. Epic Games, the maker of Fortnite, is part-owned by the Chinese tech giant Tencent, as is Snapchat. Only two years ago electric car maker Tesla was exploring a buyout by the Public Investment Fund or Saudi Arabia.
The same year, CFIUS and Trump blocked an attempt by Singapore-based chipmaker Broadcom to buy an American counterpart, Qualcomm – even though Broadcom was in the process of relocating to the US.
Hufbauer does believe that Trump’s move will have a chilling effect on other deals.
“As long as he is in office, any major acquisition could be subject to his interference – obviously from China, but also from France or Brazil or whatever,” he says.
“I think we will have another several months of this, and I would expect [that with] any major, headline type of deal that might be in the offing, the firms would think long and hard about postponing it until next year.”
Greg Becker, chief executive of Silicon Valley Bank, is not so sure. He argues that TikTok was a special case: controversial because social media always is, and forced into the headlines by the President’s tweets about it.
“I think it’s still on the margin,” he says. “Most mergers and acquisitions, and even IPOs, are more domestic – or if they are international, I’d say they are relatively non-controversial. I don’t think in general, you’re going to see much of an impact on capital markets.”
Even so, there may be other effects. Mark Almond, a lecturer in modern history at the University of Oxford and expert on Turkey and Russia, believes there will be diplomatic fallout, saying Trump appeared to be asking for “pizzo” – Italy’s traditional term for Mafia protection payments.
“Imagine if it was a Japanese app or a South Korean app,” he says. “Would it be a good thing for America to say we don’t want Silicon Valley to compete with these products?
“This may be intended as a signal to Beijing, but it may also send a message to others who are at the moment not remotely hostile towards the United States. It gives his enemies, and his enemies in the US, grounds to say that it looks like a mafia shakedown.”
For Erica Frantz, who studies authoritarian regimes at Michigan State University, Trump’s treatment of TikTok presents an additional danger.
“Savvy strongman leaders,” she says, often try to control major industries, both to increase their personal wealth and “divvy out perks to key insider supporters”.
She does not believe that this deal fits that pattern, describing it as election-year posturing rather than a genuine threat to democracy. But she does believe that it “ratchets up the potential for corruption”, given that Trump has also “blurred the lines” between his personal wealth and that of the nation.
As for the business world, Frantz suggests we might soon expect more announcements like Microsoft’s. “Companies often prioritise deference to get the deal that they want in place,” she says. “It is well known that Trump is narcissistic and responds well to his ego being stroked.”
– Daily Telegraph