• The bond market's famous recession gauge has been flashing for 18 months.
• A downturn could be delayed for months after the yield curve first inverts, Paul Dietrich said.
• He predicted a recession would hit the economy "sometime soon."

A famously accurate recession indicator has been flashing for 18 months without an economic slowdown materializing — but the inverted yield curve is still correct, and a downturn is looming, B. Riley Wealth's chief investment strategist Paul Dietrich says. 

Dietrich pointed to the inverted Treasury yield curve, a highly accurate recession gauge that flashes when the yield on the 2-year US Treasury surpasses the 10-year Treasury. 

An inversion on the 2-10 Treasury spread has correctly predicted every recession since 1955 — and it's been flashing its infamous warning since November 2022, around the time B. Riley's collection of leading economic indicators also began to signal a coming recession.

The resilience of the US economy has stunned observers, but while some economists have dialed back their warnings of a coming downturn, one is still coming, Dietrich said in a note to clients last week. In the past, recessions have taken up to 28 months to officially start after being signaled by the yield curve and leading economic indicators, he noted.

Stocks also look due for a correction. The US is in the midst of a 15-year secular bull market, the longest in US financial history.

Forecasters have likely been taking their recession calls off the table out of impatience, Dietrich said, though he anticipated recession calls to come back into the picture within the next six months. 

"I think wise investors should be very skeptical of those who tell you we are starting a new bull market and that we will not have a recession. They want you to believe that the natural business cycles of bull markets followed by a recession have been magically suspended and 'this time is different.' It is not different!" Dietrich said. "I don't know the exact date of the next recession, but I know it will come sometime soon."

Dietrich is among the more bearish forecasters on Wall Street, having warned investors of an impending recession for months. Previously, he predicted the economy could see a mild recession as soon this year, which could tank stocks as much as 49%. 

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• Global military spending in 2023 rose to the highest levels ever recorded, analysts said.
• The Stockholm International Peace Research Institute said the spike was the steepest rise since 2009.
• Europe, the Middle East, Asia, and Oceania saw particularly large increases, it said.

Global military spending surged by 6.8% in real terms in 2023 to reach $2443 billion — the highest level ever recorded, according to the Stockholm International Peace Research Institute.

SIPRI released its annual report on trends in world military expenditure on Monday, describing last year's spike as the "steepest year-on-year increase" since 2009.

And the trend is truly global.

All five of the institute's defined geographical regions saw rises in military spending for the first time since 2009, with Europe, the Middle East, Asia, and Oceania recording particularly large increases, it said.

Global conflicts have been on the rise since around 2012, according to the International Crisis Group, with fighting simmering, breaking out, or expanding in Ukraine, Gaza, Ethiopia, and Myanmar over the past few years — to name just a few.

This, in turn, has ramped up military spending.

Nan Tian, a senior researcher with SIPRI's Military Expenditure and Arms Production Program, said the "unprecedented" rise in defense spending came in direct response to the "global deterioration in peace and security."

"States are prioritizing military strength but they risk an action–reaction spiral in the increasingly volatile geopolitical and security landscape," he said.

In fact, military expenditure has grown so much that global expenses per person reached $306 in 2023, SIPRI reported.

The institute cited Russia's military spending, which it says climbed by 24% to reach an estimated $109 billion in 2023. It also highlighted Ukraine, which ranked eighth in terms of overall defense spending, following a 51% year-on-year increase.

Lorenzo Scarazzato, a SIPRI researcher, said that two years of Russia's war in Ukraine had fundamentally altered the security outlook for European NATO states.

He added that the NATO target of 2 percent of GDP being spent on defense is now being seen "as a baseline rather than a threshold to reach."

Eleven out of 31 NATO members fulfilled or exceeded the threshold in 2023, the highest number since the agreement was struck in 2014, per SIPRI.

The US, meanwhile, held onto its position as the world's largest defense spender, with its military spending rising by 2.3% to reach $916 billion in 2023, per the institute.

This is far more than China, the world's second-largest military spender, it said, which spent an estimated $296 billion on defense in 2023, up 6%.

At the same time, Israel saw its defense spending rise by 24% to reach $27.5 billion in 2023, mostly due to its large-scale offensive in Gaza, SIPRI's report found.

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• Pinal Air Park in Arizona is one of the largest aircraft storage facilities in the world.
• The multi-million business boomed during the pandemic as airlines worldwide grounded hundreds of jets.
• The airpark is also a hub for maintenance, as well as re-configuring jets when they get a new operator.

As the aviation industry hopes to reduce its carbon footprint, companies are coming up with new strategies to alleviate CO2 emissions.

in April, the Aviation Circularity Consortium, including Australian flag carrier Qantas and other groups, was created as a "joint mission to accelerate supply chain decarbonisation."

The plan is to use the 8,000 "end-of-life retired aircraft" that are sitting in deserts, jungles, and storage yards across the globe. Another 11,000 are expected to be available over the next 10 years.

According to the consortium, the thousands of decommissioned aircraft offer "a new source of valuable circular materials" and address the "significant waste pollution challenges to the shrinking legal boneyards around the world."

These "graveyards" started filling up during the pandemic when airlines had to make drastic cost-cutting changes, including furloughing pilots, cutting routes, and indefinitely storing hundreds of planes in the desert.

One of these facilities is Pinal Air Park in Marana, Arizona — a small town located about 90 miles southeast of Phoenix.

As airlines started to shrink in 2020, hundreds of planes from all over the world flew to the 2,080-acre airpark.

With the influx, Pinal had to take special precautions to ensure the aircraft was ready to fly once travel eventually rebounded.

Because of this, Ascent Aviation Services — the largest aircraft service provider on the airfield — had to beef up its staff to maintain the constant arrivals.

Company CCO Scott Butler told Business Insider last year that starting in March 2020, planes were coming in at about one per hour — requiring over 150 extra mechanics.

Additional parking lots were built to handle the hundreds of planes, which continued to be filled into 2021 and 2022 with jets coming from places like the US, South Korea, UK, Australia, and Canada.

I went inside one of the US' largest aircraft storage facilities and saw how it isn't emptying out despite the rise in air travel

Leasing companies were also filling the airfield after buying up inexpensive planes sold during COVID and storing them at Pinal.

Inside a remote Arizona aircraft boneyard storing nearly 300 planes grounded by the pandemic

However, with travel now roaring back and demand on track to surpass 2019 levels, AAS has gotten back to its roots — maintenance, repair, and overhaul (MRO).

Basic offerings include simple maintenance checks and on-demand repairs, like fixing the landing gear or inspecting the flight controls.

However, heavy maintenance is the most costly for airlines. This involves a full assessment of the aircraft and can take up to 60 days for widebody jets, Butler explained.

"A narrowbody will cost around $2 million," he told BI in May 2023. "With widebodies, you're easily looking at $3 million."

These projects take a lot of manpower. Butler said the company targets 400-500 hours per day for widebodies and 300 per day for narrowbodies.

Because the checks are so expensive, many carriers opt to sell the aircraft when it gets to that stage in its lifecycle, which is typically every six to 10 years.

Source: National Aviation Academy

Or, the operator will allow an aircraft lease to expire. This means if the lessor finds a new home for the plane, it will need to be fitted for its next contract.

For these conversions, AAS offers additional services, like re-painting liveries, switching out flight systems, and installing new cabins.

Sometimes, aircraft will transition from a passenger jet to a cargo plane — a service the company saw increased popularity during the pandemic, especially with older jets.

See the giant Airbus A330 freighter aircraft that will power a new lucrative cargo operation for Amazon

For flight tests and deliveries, the operator will arrange pilots, who will land and depart on the designated runway stretching Pinal's airfield.

Overall, Butler said AAS can do nearly anything an airline would need from an MRO standpoint.

The main service it can't provide is engine overhauls, which are outsourced to other shops.

"A lot of our current projects are just waiting on engines," Butler told BI. "There's a backlog because no one did engine maintenance during COVID because of the expenses."

He explained this is adding to the already strained supply chain that has caused a slowdown in returning aircraft to service.

While AAS does a lot of work keeping airplanes flying, it also offers aircraft reclamation and end-of-life services — what the consortium wants to capitalize on.

This involves disassembling and disposing of unwanted parts, which make up about 10% of the airplane.

According to Butler, the other 90% is recyclable. These include things like engines and galley carts…

…and avionics and landing gear.

However, he said custom interiors do not have much value except to the original operator.

A plane can spend months being salvaged, with hundreds of collected parts being resold or repaired for future use.

The re-certified pieces can be sent back to airlines who keep them in their inventory as spare parts — meaning retired jets can still provide for current ones.

Inside a remote Arizona aircraft boneyard storing nearly 300 planes grounded by the pandemic

Meanwhile, some carriers will take parts of the metal to create memorabilia, like cutting the logo or airline name from the fuselage and using it as wall art.

In addition to the strong MRO and reclamation divisions, storage and parking is still a strong revenue source for AAS.

"80% of all the stored aircraft worldwide are stored in the Southwest," Butler told BI in 2021.

During an April 2023 tour of the airpark, BI found the main lot full of planes, including two rare Boeing 747SPs.

Mechanics spend up to two weeks getting a plane ready for storage. Important components like the engines, pitot tubes, systems, and landing gear are sealed and protected.

This is especially important to prevent critters and other wildlife from taking up residence in the airplane's openings and small crevices.

Butler told BI the stored aircraft also get regular maintenance checks to keep them airworthy.

Parked planes, on the other hand, do not get this service and can be left to collect dust — giving Pinal its "boneyard" nickname.

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• Chinese banks are helping to aid Russia's invasion of Ukraine, the US alleges. 
• The US is considering sanctions to cut Chinese banks off from the dollar, according to The Wall Street Journal.
• However, it may speed up de-dollarization efforts by China and Russia.

The US is drawing up sanctions that could cause some Chinese banks to lose access to the dollar, according to The Wall Street Journal.

The measures are being taken to prevent what the US sees as China's support for Russia's invasion of Ukraine, the outlet reported, citing people familiar with the matter.

Last week, Secretary of State Antony Blinken accused China of providing Russia with crucial technology parts for its weapons industry.

"We see China sharing machine tools, semiconductors, other dual-use items that have helped Russia rebuild the defense industrial base that sanctions and export controls had done so much to degrade," he said at a press conference following the G7 foreign ministers meeting in Italy.

According to Chinese customs data, trade between the two countries reached a high of $240 billion in 2023, with China becoming one of Russia's largest goods suppliers since Western companies left the Russian market after the country's 2022 invasion of Ukraine.

A Chinese embassy spokesperson previously told Reuters that China was not a party to the war in Ukraine and that usual trade between China and Russia should not be interfered with or restricted.

Amid reports that Russia had developed ways of circumventing the sanctions, the US last year sought to punish banks and other organizations facilitating the trade.

The Journal reported that new sanctions on Chinese banks were being considered as an escalatory option in case other diplomatic attempts to curb exports from China fail.

The report comes as Blinken heads to China Tuesday, where he is likely to address US allegations that China is secretly intensifying its support for Russia's invasion.

The plan could backfire

Cutting banks off from access to the dollar would have huge implications for China, with its economy already in a precarious state after a property market debt crisis.

But it could also backfire on the US by speeding up de-dollarization efforts.

In response to previous sanctions, Russia and China intensified efforts to create exchange mechanisms that don't rely on the dollar.

China doesn't want to get rid of the dollar entirely, but to diminish its dominance and create security for its economy if the US decides to impose even greater sanctions.

The Financial Times last August reported that economies in the "global south" that have long criticized US dominance over the financial system are increasingly keen to use currencies and exchange platforms that don't require the US currency.

Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center think tank, told The Wall Street Journal that regional Chinese banks had emerged that had little involvement in dollar exchanges.

"Payment chains are slowly being rebuilt," Prokopenko told the outlet. "Both Russians and Chinese are constantly adapting to the new conditions."

The US is betting that China's financial links to the US are stronger than its relationship with Russia.

"There is underused leverage by the West, especially given the dollar and euro dominance in the financial system," said Maria Snegovaya, a senior fellow at CSIS told the Journal.

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• A 25-year-old Japanese 'sugar baby' has been sentenced to nine years in prison.
• A court ruled that Mai Watanabe defrauded men she met on dating apps out of more than $1 million.
• Watanabe also sold a manual on how to execute similar scams, helping another woman in her efforts.

A 25-year-old "sugar baby" was handed a nine-year prison sentence for defrauding men she met on dating apps out of more than $1 million, and selling a manual on how to carry out similar scams.

Mai Watanabe, also known as "itadaki joshi Riri-chan," which translates as "sugar baby Riri," was sentenced by the Nagoya District Court on Monday, The Japan Times reported.

The news outlet said that Watanabe was also fined 8 million yen, about $52,000.

According to the court's ruling, Watanabe defrauded three men in their 50s out of a total of around 55.8 million yen, about $1 million, between 2021 and 2023, the Nippon news agency reported.

She swindled one victim out of 117 million yen, about $756,000, by convincing him that she needed the money to pay off a debt, according to the Kyodo news agency, which added that she used a similar story to defraud the other two men.

Nippon reported that Watanabe used most of the money to make payments at male host clubs in Tokyo's Kabukichō district.

In these clubs, female customers pay for male company and are often poured drinks and flirted with by male hosts.

Kyodo, citing the court's ruling, said that Watanabe was also convicted of creating a manual on how to execute similar scams.

The Jiji Press news agency said she sold the manual to a 21-year-old woman in 2022, aiding her in swindling someone out of about 10 million yen — a little over $64,000.

The news agency said Watanabe was also convicted of evading income tax by hiding about a quarter of the scam's proceeds.

Being a sugar baby can be financially rewarding. A freelance writer previously told Business Insider that she got paid as much as $500 for dates, and was treated to designer clothes, expensive dinners, and stays in luxury hotels.

For sugar daddies — older men who pay younger women — it can sometimes offer a form of companionship, whether platonic or otherwise.

But if they're not careful, they risk falling victim to romance scams.

The Federal Trade Commission in the US received 64,003 reports of romance scams in 2023, amounting to total losses of more than $1.1 billion.

The median loss per person, at $2,000, was higher than in any other type of imposter scam, the FTC noted.

According to a 2023 report by the commission, nearly 60% of people who lost money to a romance scam that year first made contact with the scammer through social media, websites, or apps.

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• A handbag designer was sentenced to 18 months in prison for importing bags made of rare skins.
• The bags were made from caiman and python skin, both protected under international trade laws.
• Nancy Gonzalez made roughly $2 million, reflecting the growth in the luxury handbag market.

A luxury handbag designer was sentenced to 18 months in prison for illegally importing bags into the US made out of the pelts of protected species.

Nancy Gonzalez, the 71-year-old founder of Gzuniga Ltd, sold the bags for an average price of more than $2,000, according to the Department of Justice.

Victoria Beckham, Britney Spears, and Salma Hayek were reportedly among her clients, as well as cast members of "Sex and the City," the Associated Press reported.

It's unclear if any of them bought handbags made out of endangered animal skins, the outlet noted.

The DOJ found that between 2016 and 2019, Gonzalez enlisted friends, family, and employees as part of a scheme to fly designer purses, handbags, and totes from her factory in Colombia into the US.

Carrying the bags in their luggage or on their person, those traveling would, if questioned, tell authorities the bags were gifts, the AP reported.

The handbags would then be displayed at Gzuniga's Manhattan showroom, ready for high-end retailers to buy for their own stores, according to the DOJ.

The bags were made of caiman — an alligator-like reptile — and python skin, the AP reported.

Both species are protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora, and Gonzalez did not have the right import documents, the news agency added.

At the sentencing, Gonzalez told the court she was deeply sorry, per the AP. She added that "under pressure, I made poor decisions."

While Gonzalez's lawyers argued that only a tiny proportion of her stock was sourced without proper authorization, prosecutors said that she enriched herself while "producing felons" out of those she enlisted to carry the bags, the AP reported.

Prosecutors estimated that Gonzalez amassed more than $2 million through this scheme, AP reported.

This sum reflects the massive growth in the luxury handbag market, with buyers increasingly seeking high-end bags not only for fashion status but also as an investment.

In 2022, handbags — mainly from Chanel, Hermès, and Louis Vuitton — performed better than wine, rare whisky, and jewelry as a luxury asset class, the Financial Times reported.

The market has become so heated that two Californian customers are suing Hermès over its restrictive sales practices around the fabled Birkin bag.

Gonzalez, who pleaded guilty to smuggling and conspiracy, was sentenced on Monday along with an associate, Mauricio Giraldo.

A further associate, John Camilo Aguilar Jaramillo, has pleaded guilty and is set to be sentenced on June 27, per the DOJ.

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• About 46,000 flights reported navigation problems flying over the Baltics during an eight-month period, The Sun reported.
• The tabloid reported that many were likely to have been Russian jamming and spoofing attacks.
• Estonia, Latvia, Lithuania, Poland, Türkiye, and Cyprus are all at high risk of the attacks, per the report.

Thousands of planes may have run into issues with jammed GPS signals, according to a report by British tabloid The Sun which suggests that Russia may be to blame.

Planes reported about 46,000 instances of problems with their satellite navigation over the Baltics between August 2023 and the end of March 2024, The Sun reported, using flight-log data from GPSJAM.org. Many of these were likely to have been jamming and spoofing attacks, The Sun reported.

Jamming is an intentional radio frequency interference with global navigation satellite systems (GNSS) that prevents planes from accessing satellite signals and makes the GNSS system "ineffective or degraded," the European Union Aviation Safety Agency says.

Spoofing, on the other hand, occurs when false satellite signals are sent to "deceive" GNSS receivers and cause them to compute incorrect position, navigation, and timing data, the EASA says. The Sun reported that in some cases planes swerved around objects that weren't actually there.

Both The Sun and The Guardian reported that Russia is suspected of being involved in GPS jamming attacks.

According to The Sun, Estonia, Latvia, Lithuania, Poland, Türkiye, and Cyprus are all at high risk of the attacks.

Between August 2023 and the end of March 2024, more than 2,300 Ryanair flights and more than 1,350 flights by Hungarian budget carrier Wizz Air reported satnav problems in the Baltic region, per The Sun. The frequency of instances of navigation problems rocketed from fewer than 50 a week last year to more than 350 a week last month, The Sun reported.

In March, a Royal Air Force plane that UK Defense Secretary Grant Shapps was flying on from Poland to the UK "temporarily experienced GPS jamming" when it flew close to Kaliningrad, a Russian exclave in the Baltics, a spokesperson for British Prime Minister Rishi Sunak said.

There's been a "sharp rise" in attacks on GNSSs, Luc Tytgat, the acting executive director of the EASA, said in January. The EASA noted that the uptick in jamming and spoofing incidents had "increasingly threatened the integrity" of positioning, navigation, and timing services across Eastern Europe and the Middle East.

In a safety information bulletin in November, the EASA noted that the rise in jamming and spoofing had started in February 2022, the month that Russia invaded Ukraine.

"This issue particularly affects the geographical areas surrounding conflict zones" but is also encountered in parts of the Mediterranean, the Black Sea, the Baltic Sea, and the Arctic area, the EASA said. It noted that in the Baltic Sea area this affected flight information regions surrounding Kaliningrad.

But the CAA told The Independent that jamming and spoofing near conflict zones were often by-products of military activity, not deliberate actions.

"GPS jamming does not directly impact the navigation of an aircraft and while it's a known issue, this does not mean an aircraft has been jammed deliberately," Glenn Bradley, head of flight operations at the UK Civil Aviation Authority, told The Sun.

A Ryanair spokesperson told The Sun that if location systems, such as GPS, were not functioning, the crew would switch to alternate systems.

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• Chinese automaker BYD briefly eclipsed Tesla as the world's top seller of electric vehicles.
• Even without access to the American market, BYD's affordable EVs are popular in China.
• Here's how a little-known Chinese brand proved it could go toe-to-toe with an industry giant.

BYD may not be a household name in America, but it recently made itself known in a big way.

For a brief moment earlier this year, the Chinese automaker unseated Tesla as the world's top seller of electric cars.

Even though you won't see a BYD car in America (yet), the company has built an affordable brand that's popular in China and elsewhere.

Here's the story of the company that proved it could outsell Elon Musk.

BYD doesn't stand for anything — officially.

Wang Chuanfu and a cousin founded BYD in 1995. Then a 29-year-old government researcher, Wang came from a family of rice farmers. He earned a university scholarship and eventually moved to the Special Economic Zone in Shenzhen to start his new company.

The "YD" in the name comes from Yadi, the village in Shenzhen where the company was originally located, according to one South Korean newspaper. The "B" was added later, supposedly as a promotional tool. Wang has said in interviews that, taken together, the "BYD" name didn't stand for anything in particular.

It was only later that Wang derived the slogan "Build Your Dreams." The company has also acquired another nickname: "Bring Your Dollars."

The company was originally a cell phone battery manufacturer.

The company's original business wasn't cars. It was cellphone batteries. BYD challenged established Japanese suppliers Toyota and Sony by providing a cheaper alternative. By 2002, companies like Motorola, Nokia, Sony Ericsson, and Samsung were all using BYD batteries.

They started making cars in 2003.

BYD moved into the car business after buying Xi'an Tsinchuan, a failing state-owned automaker that was then an arm of defense contractor Norinco, according to the South China Morning Post.

The company launched its first car in 2005. The BYD F3 was a compact sedan that resembled the Toyota Corolla. It sold for as little as 40,000 yuan, or about $5,850.

Warren Buffett was a key early booster.

Billionaire investor Warren Buffett was one of the high-profile names to take interest in BYD early on. Looking to invest in China's booming car market, Buffett toured BYD's headquarters.

While the Berkshire Hathaway tycoon was there, Wang reportedly took a sip of battery fluid to prove how clean his batteries were, according to The Wall Street Journal. Buffett was so impressed by the experience, he offered to buy 25% of the company.

Wang declined that offer, but Buffett was not deterred. Berkshire Hathaway acquired a 10% stake in BYD — for $232 million — in 2008.

Their first electric car drew scorn from Elon Musk.

The company debuted its first fully electric vehicle, the e6, in 2010. Benefiting from Chinese government subsidies, it was able to compete with its Japanese counterparts.

But not everyone was impressed. Tesla CEO Elon Musk, in a 2011 interview, laughed when he was asked whether he considered BYD a serious rival to Tesla.

"Have you seen their car?" he said. "I don't think they make a good product. I don't think it's particularly attractive. The technology is not very strong."

BYD's hybrid cars turned it into a titan of Chinese automakers.

BYD established itself as one of the top automakers for hybrid vehicles in China in the 2010s. Its most popular offering was the Qin, introduced in 2012, which became one of the bestselling cars in China.

That wasn't the only offering that propelled BYD to prominence, however. The company also released the Tang, a hybrid SUV, and partnered with Daimler AG (now Mercedes-Benz) to make its Denza line.

BYD took the EV crown from Tesla — briefly.

Even though most of its sales in the fourth quarter of 2023 came from the Chinese market, BYD made headlines across the globe when it seemingly did the impossible — it unseated Tesla as the world's top seller of electric cars.

The Chinese automaker rode the EV wave on the back of its new Seagull, which debuted for 73,000 yuan (about $10,000), as well as its Song, Qin Plus, Dolphin, Yuan Plus, and Han EVs.

Tesla reclaimed the crown in the first quarter of 2024, though both companies saw steep declines in their sales.

Don't expect to see a BYD car on American roads anytime soon.

For a time, it looked like we were just a few years away from getting Chinese electric cars in the United States. A BYD executive said as much in 2017, and the company even hired Leonardo DiCaprio as a brand ambassador for English-speaking customers.

Since then, BYD has expanded overseas. The Chinese automaker is planning a factory in Mexico — alarming US officials — and even created its own shipping fleet in a bid to cut down on export costs.

But the company says it has abandoned its plans of selling its EVs to Americans. Analysts have pointed to geopolitical tensions and trade barriers between the two countries, as well as the slumping demand for EVs in the United States.

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• TikTokers are stressed about a potential US ban and are criticizing the intentions behind it.
• Chinese-owned ByteDance will be forced to sell TikTok to a US company or face a nationwide ban.
• TikTokers argue a ban would infringe on their freedom of speech and hurt the creator economy.

TikTokers are stressed about the app potentially being banned in the US, saying it would be "devastating" to their careers since the businesses they've built would "shrivel and die."

The US House of Representatives voted on Saturday to pass a bill that would force Chinese-owned ByteDance to sell its US TikTok assets or face a nationwide ban.

The US Senate will likely approve the bill this week. Once passed, the bill would mean TikTok could be banned in the US in 2025, but it could take even longer (if it happens at all).

Still, creators are unhappy, and see the move as hypocritical and infringing on their freedom of speech.

Those who want the app banned argue that TikTok may be forced into giving over user data to the Chinese government. They also fear TikTok could be suppressing or amplifying certain topics due to governmental pressure.

TikTok has repeatedly denied these allegations and made attempts to distance itself from ByteDance.

TikTok and its users have fought back, with the platform urging people to call their representatives and make their views heard.

Creators have enthusiastically mobilized against the bill and called out what they say is the hypocrisy of the US government. They claim it focuses heavily on one app while leaving other tech companies, such as Meta and Google, alone.

Leo LonDini, who has nine million followers, questioned how other companies with partial Chinese ownership seemingly have a free pass.

Tencent, a Chinese company, has a stake in Epic Games, Universal Group, Warner Music Group, Spotify, Tesla, Snapchat, and many others, for example, and a significant amount of Apple products are made in China.

"Listen, I don't want any government, foreign or domestic, spying on me," LonDini said. "And if our government could actually prove that Chinese companies are spying on us, well, then we have a decision to make, don't we? Either we accept the risk, or we get rid of the app."

The kicker is having a choice, he added.

"The choice that you took away from us."

Brett Jansen, a creator who shares news on TikTok, said in a recent video she thought it was suspicious that the one app where information spreads freely will potentially be banned.

She described the bill as "fear-mongering," and accused the government of using people's ignorance of TikTok and how it works to their advantage.

"Can someone please help me to understand how the US government is not doing the exact same thing that they are accusing China of doing?" she said. "Which is essentially controlling the narrative, controlling how our data is collected, and controlling how that data is used."

Shira, a content creator who operates under the name shirashiraonthewall, told Business Insider last month that the ban is '"a tactic to control the narrative."

"TikTok has cultivated a huge community of people who discuss politics and current affairs without it being altered by propaganda," she said. "A lot of us just want to know the truth."

Without TikTok, Shira said she personally wouldn't know about "some of the injustices occurring across the world."

"It's a valuable tool in seeking solidarity," she said.

Shira also pointed to how a ban would harm her business, as she would no longer be able to make money from TikTok shop.

A ban would be "devastating" for her, she said, because years of her work would be "deleted forever."

"I know that I will just have to accept what happens and move on to making content on Instagram Reels or Shorts," she said. "But my growth and virality aren't guaranteed there as my content was uniquely made for TikTok."

She said her future, as a result, is pretty uncertain. She's worked with many large American corporations through the app, and more than half of her earnings come from brand deals with them.

A TikTok spokesperson told BI in March that the legislation has a "predetermined outcome," which is a total ban of TikTok in the US.

"The government is attempting to strip 170 million Americans of their Constitutional right to free expression," they said. "This will damage millions of businesses, deny artists an audience, and destroy the livelihoods of countless creators across the country."

Ben Stanley turned to TikTok when he started making artwork. He said he hasn't been able to hold down a job due to his mental and physical health complications, so growing a following on TikTok has provided him a flexible way to earn an income.

It's TikTok's algorithm that has made him so successful, he told BI.

"Should Tiktok be banned, my business won't be able to sustain itself because I don't have the same kind of following anywhere else," he said.

"So I would essentially be unemployed again, which would be a massive strain on my health as well as my wife and son on the way."

A loss of TikTok would mean a loss of his business, he said, meaning his income would "shrivel and die."

Tahrea Sherman, a content creator who makes TikToks about pop culture, told BI she is worried that if TikTok is sold to a US company, then the government would suppress certain content.

This is a concern because TikTok is already hot on content moderation.

"I feel like it's doing what social media is supposed to do, which is connecting with other people and exploring new ideas," Sherman said. "They want to change what makes the app great, and I think that's very unfortunate."

Catalina Goanta, an associate professor of private law and technology at Utrecht University in the Netherlands, told BI the bill in Congress only targets social media, which is "particularly odd and incoherent" considering there are security concerns around many other businesses that operate in the US, including Temu.

But it also targets the digital creator economy, which is expected to reach half a trillion dollars by 2027, according to Goldman Sachs. An overwhelming amount of the world's most famous creators are US-based.

According to Statista, around 75% of the marketing spending worldwide on social media stars was on US influencers in 2023.

"Losing TikTok would be a terrible blow not only to the livelihood of creators of all sizes in the US but also to the creative digital industry as a whole," Goanta said. "It is an economically nonsensical decision to bring down a poorly understood modern, creative, digital industry."

There's the potential of TikTok bringing a lawsuit if the bill passes this week.

"At the stage that the bill is signed, we will move to the courts for a legal challenge," TikTok's head of public policy in the Americas, Michael Beckerman, wrote in an internal memo to staff on Saturday.

"We'll continue to fight, as this legislation is a clear violation of the First Amendment rights of the 170 million Americans on TikTok."

Editor's note, April 23, 2024: This article has been updated to reflect the House of Representatives vote, which passed a bill to ban TikTok in the US.

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• Apple's China headache is getting worse.
• A slide in iPhone sales has left Apple in third place in China, per Counterpoint Research estimates.
• It's the iPhone's worst performance in China since 2020 amid rising competition from local rivals.

Apple's struggles in China just keep getting worse.

It's sunk from first to third place in the Chinese smartphone market after iPhone sales tumbled 19% in the first three months of the year, according to estimates from Counterpoint Research.

The sales slump marks the iPhone's worst performance in China since 2020 and underlines increasingly tough competition from local rivals.

Chinese-based rivals Vivo and Honor outpaced Apple's sales in the first quarter of the year, per Counterpoint data. Apple finished the quarter with a 15.7% share of the market, down from 19.7% in the same period last year and barely ahead of Huawei's 15.5%, per the research outfit.

In stark contrast with Apple's slide, Huawei sales soared by almost 70% compared with the first three months of 2023.

Counterpoint research analyst Ivan Lam said in a note that Huawei's surge had directly affected iPhone sales in China. Apple had also been hit by fewer consumers replacing their smartphones, he added.

Huawei's rise has given Apple CEO Tim Cook a new headache, given he's already dealing with disappointing iPhone 15 sales and government bans in China. Cook went to China in March to visit Apple's newest store in Shanghai and attend the high-profile China Development Forum in Beijing.

Huawei recently released a new series of smartphones called the Pura 70 that has an advanced camera system similar to the trio of lenses on the iPhone Pro range.

The new phones, which start at $760, provide Huawei with a new opportunity to win over Chinese customers from Apple. Last year the company launched the Mate 60 Pro series that was aimed at iPhone 15 buyers.

Despite the stiff competition, Lam said iPhone sales could still reverse their downward slide.

"We are seeing slow but steady improvement from week to week, so momentum could be shifting," he said. "For the second quarter, the possibility of new color options combined with aggressive sales initiatives could bring the brand back into positive territory."

The 19% decline is slightly better than the 24% slide that Counterpoint had estimated for the first six weeks of the year.

The Chinese smartphone market is crucial for Apple as it's second only to the US, and is ahead of Europe.

Apple has been fighting on multiple fronts this year. In March, the European Commission fined the company about 1.8 billion euros ($1.95 billion). In the US, Apple is battling an antitrust lawsuit from the Department of Justice.

Apple did not immediately respond to a request for comment from Business Insider, made outside normal working hours.

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