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TikTok Deal with US Investors Stalled by China Amid Trade Tensions
Last Wednesday, the Trump administration reportedly devised a strategy aimed at safeguarding TikTok’s operations within the United States. Efforts to avert a potential ban on the popular video-sharing application saw TikTok’s Chinese parent company, ByteDance, alongside American investors and Washington officials, converge on a revised ownership framework, according to sources familiar with the matter. This proposed structure aimed to fulfill the stipulations of federal legislation mandating TikTok find a new owner to resolve national security apprehensions.
Tentative Plan for TikTok Ownership Structure
The contemplated arrangement stipulated that new investors would possess a 50 percent stake in a newly formed American TikTok entity. Conversely, Chinese owners would maintain less than 20 percent ownership, aligning with the legal requirements, sources indicated. ByteDance conveyed to the White House that the Chinese government expressed initial comfort with the overall framework, according to individuals with knowledge of the discussions.
Chinese Government’s Rejection of Proposed Deal
By Thursday morning, a draft executive order from President Trump, detailing the proposed TikTok deal, was reportedly circulating. However, the plan encountered an obstacle. ByteDance informed the White House that the Chinese government would no longer permit the TikTok transaction to advance, citing President Trump’s recent announcement of new tariffs on Chinese imports.
Deadline Extension Amid US-China Trade Standoff
Subsequently, President Trump granted TikTok additional time. On Friday, he postponed the enforcement of the federal law, extending the deadline for a TikTok resolution until mid-June.
“Reports suggest we were very close to a TikTok agreement, but China altered the terms due to tariffs,” President Trump stated to reporters on Sunday aboard Air Force One.
TikTok’s Uncertain Future in US-China Geopolitical Tussle
This impasse underscores TikTok’s entanglement in the escalating geopolitical tensions between the United States and China concerning trade and technological dominance. It further highlights China’s significant influence over TikTok’s future within the U.S., casting doubt on the prospect of a finalized agreement. “The involved parties appear reluctant to compromise, leaving TikTok caught in the middle of a clash between two major global economies,” commented Anupam Chander, a law and technology professor at Georgetown University.
The administration and ByteDance had been formulating a structure that would permit TikTok’s major U.S. investors, including General Atlantic and Susquehanna International Group, to retain their investments while government officials introduced new capital to dilute the app’s Chinese ownership.
The preliminary terms indicated that new investors would control 50 percent of a new American TikTok entity. Existing investors would hold 30 percent, and Chinese owners less than 20 percent, according to sources privy to the details. Private equity firms such as Blackstone and Silver Lake, along with venture capital firm Andreessen Horowitz, had considered acquiring a stake in the new entity.
The proposal was outlined in an extensive document for investors, sources revealed.
Sources involved in the deal noted that further steps were necessary. Certain prospective new investors considered any agreement conditional, pending thorough due diligence, as is customary in large transactions.
China’s Role as a Deciding Factor
China’s stance was always a significant variable. Prior to the president’s tariff announcement, ByteDance believed the Chinese government was amenable to the structure being developed in Washington, sources familiar with the situation mentioned. However, even before the tariff announcement, there was no assurance that Beijing would offer its informal endorsement or formal authorization.
Discussions surrounding TikTok are anticipated to become increasingly intricate as trade friction between the two nations intensifies. China initiated retaliatory tariffs following Mr. Trump’s announcement, prompting the president to warn of additional 50 percent tariffs if China persisted.
President Trump has repeatedly hinted at potentially reducing tariffs on China in exchange for Beijing’s approval of a TikTok deal.
Leveraging tariffs for negotiations is “a remarkable effort to coerce the sale of a foreign company,” Mr. Chander observed.
The trade dispute may persist into June, raising concerns about a prolonged stalemate unless tariff issues are resolved, he added.
TikTok has consistently maintained it is not for sale for nearly a year.
ByteDance acknowledged for the first time on Friday its involvement in negotiations with the U.S. government regarding the app’s future, but emphasized that ultimate decisions rested with another party.
“There are key matters to be resolved,” a ByteDance spokesperson stated. “Any agreement will be subject to approval under Chinese law.”