TikTok’s fate could be decided by tariffs

Trump is holding out ByteDance's app as a bargaining chip. Will China take the bait?

TikTok’s fate could be decided by tariffs
(Soleyn Feyissa / Unsplash)

On Wednesday, President Trump announced a sweeping set of tariffs affecting almost every American trade partner. A day later, the stock market had its worst day since the pandemic, and economists warned that Trump risked plunging the economy into recession. On the plus side, there is no plus side. This is all really happening, and for no good reason at all. Sorry about that.

The primary rationale given for Trump's tariffs is that they are meant to restore fairness in global trade — to prevent America's trade partners from taking advantage of it with tariffs of their own, creating trade deficits that the administration has positioned (flimsily) as a national emergency.

The second, more plausible rationale Trump has offered is that his tariffs are a negotiating tactic. While the Constitution designates the right to establish tariffs to Congress, Congress has passed a series of laws over the years delegating that authority to the president. In using that authority, Trump has already achieved a most pleasing (to Trump) outcome: every country in the world now must call and personally beg him for the favor of restoring the global economy to its formerly functional status.

One nice thing about Trump (sincerely) is that you rarely have to spend too much time wondering what his motives are, because before too long he will just tell you. On Thursday afternoon, asked by reporters about the reasoning behind his tariffs, he did just that.

Here's Annmarie Hordern in Bloomberg:

“The tariffs give us great power to negotiate,” Trump said, adding that “every country has called us.”

Asked if that meant he was considering relenting, Trump said it “depends.”

“If somebody said that we’re going to give you something that’s so phenomenal, as long as they’re giving us something that’s good,” Trump said.

What would be something "phenomenal" enough to win Trump's favor?

Once again, he just told us. From Bloomberg again:

He also reiterated that he would, in particular, be willing to offer tariff relief for China if Beijing approved the sale of the US operations of ByteDance Ltd.’s TikTok social video app. The service is facing a Saturday deadline for divestment, unless Trump offers an extension as part of his efforts to broker a deal.

Trump said they were “very close to a deal.”

One would hope so. On January 19, a law passed by Congress last year and signed into law by President Biden took effect that required ByteDance to divest itself of TikTok or else ban it in the United States. Trump took office the following day, and signed an executive order instructing the attorney general not to enforce the law for 75 days while he sought a buyer for the app.

This executive order appeared to be illegal on its face. The law, which was upheld unanimously by the Supreme Court, made no provision for the president to grant an extension. But as soon as it came into effect, seemingly no one wanted to enforce it — including the Biden administration, which called ByteDance's temporary shutdown of the app on January 20 an unnecessary "stunt."

Apple and Google, which kept TikTok out of their app stores for weeks in fear of the billions of dollars in fines the law told them they would be liable for, were eventually convinced that no one would actually enforce the law and allowed TikTok to return.

Trump's 75 day extension is up on Saturday, and the administration is promising a deal. “It’ll come out before the deadline,” Vice President J.D. Vance told Fox News. But given the chaos caused by the tariffs and the ongoing uncertainty about how a deal for TikTok would work, it seems likely that any agreement announced by Saturday would only be in principle.

Kaya Yurieff reported one possible shape for the deal on Wednesday in The Information:

Under Trump’s proposal, TikTok America would be roughly 50 percent owned by new U.S. investors and license TikTok’s algorithm from ByteDance, the person said. Existing investors in ByteDance would have a roughly one-third stake in the new company, while ByteDance would retain a 19.9 percent stake.

That structure would put ByteDance’s ownership just under the 20 percent threshold required in the U.S. law passed last year requiring TikTok to sever ties with its parent company or face a ban. With the new structure, Trump could deem a qualified divesture has happened under the law, which was passed by Congress last year and upheld by the Supreme Court.

There are three things to say about this possibility.

The first is that the identity of the winning consortium remains unknown. The Financial Times has reported that a group led by Oracle is the frontrunner, with Andreessen Horowitz in talks to join the bid. Amazon and AppLovin, which makes analytics software for mobile devices, are also reported to have made bids. And — why not — the founder of OnlyFans has organized a bid as well.

While anything could change, Trump has been looking for ways to gift TikTok to his ally and Oracle CEO Larry Ellison since his first administration, and it's hard for me to imagine him giving it to anyone else.

The second thing to say is that even if Trump announces he has picked Ellison by Saturday, there's almost no chance the deal will actually be done. There is no sign, for example, that China has yet agreed to a deal. And why would they, if Trump is openly telling them that TikTok can be a bargaining chip in easing tariffs?

"Instead," Yurieff reported today, "Trump is expected to give a deadline of up to 120 days from his announcement to finalize all the nuts and bolts of a deal."

And so, the most likely outcome of Trump's 75-day extension is a further 120-day extension.

The last thing to say about the deal as described is that it betrays everything Congress set out to do when it passed the law seeking the divestiture of TikTok last year. Congress was worried about two major issues: one, that Americans' data might be misused by the Chinese government, including for surveillance; and two, that TikTok's recommendation algorithms might be used as part of Chinese influence operations in the United States.

Perhaps the deal will include some as-yet unannounced provisions to address the data issue; absent that, ByteDance would retain a 19.9 percent stake in the app, and would almost certainly continue to use Americans' data just as it does today.

More importantly, ByteDance's algorithms — which members of Congress spoke of in near-mystical terms, terrified that (among other things) it might promote the spread of pro-Palestinian videos — would continue to fuel TikTok just as they always have. There is no evidence the Chinese government has used TikTok to spread propaganda, but licensing the app's algorithm to TikTok America would give them an avenue to do so.

Mind you, I'm not even saying I found these arguments by members of Congress particularly persuasive. But this was their rationale for passing a law, and it now appears as if they are poised to pretend as if they never did.

In any case, there was a time when the fate of TikTok, and the risks of foreign propaganda, loomed large in the minds of American policymakers. But we have bigger problems now. And the question for China is whether TikTok is important enough to Trump to persuade him to undo the damage that is only just beginning.


Elsewhere in TikTok: The company faces a $552 million fine for illegally transferring European Union users’ data to China. And here’s a profile of the man who could be TikTok’s next boss, 80-year-old Larry Ellison.

On the podcast this week: Tariffs! Then, the Wall Street Journal's Keach Hagey stops by to discuss the revelations in her new book about Sam Altman. And finally, we practice flirting with Tinder's new voice-based dating game.

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