U.S. President Donald Trump last week signed an executive order that will effectively ban TikTok, unless the app is sold to a U.S. buyer by mid-September. Here’s what you need to know to get up to speed on what’s happening and what this will mean.
What is TikTok, and what is its relationship to China?
Video-sharing app TikTok was developed and is owned by Chinese company ByteDance. Lauded for its ability to create viral sensations and predict user preferences via artificial-intelligence algorithms, it has become Gen Z’s app of choice and a growing force to reckon with in the U.S. music industry, helping to launch the careers of artists like Lil Nas X.
TikTok emerged in the U.S. out of a 2017 deal in which ByteDance bought the Shanghai-headquartered lip-syncing app Musical.ly. ByteDance merged that with Douyin, its own similar app for the Chinese market, and changed its name to TikTok in 2018. The Committee on Foreign Investment in the U.S. (CFIUS) has been reviewing the original acquisition deal for potential threats to U.S. national security since last year.
In light of such concerns, TikTok has taken steps to distance itself from its China origins. The company has made its app unavailable in China to distance international users from Chinese censorship laws. (Instead, ByteDance operates Douyin as a highly censored twin of TikTok.) After Beijing recently imposed a controversial national security law in Hong Kong that severely restricts freedoms there, TikTok pulled out of the market entirely in July.
TikTok also has tried to separate its management team from Douyin’s, hiring former Disney exec Kevin Mayer as CEO, and moved to store user data in the U.S. and Singapore instead of in mainland China.
TikTok’s massive success overseas has made ByteDance the first Chinese tech firm with a product to truly reach a global audience. ByteDance is currently the world’s most valuable tech startup, estimated to be worth more than $100 billion. Despite a growing overseas footprint, it still makes most of its money in China. In 2019, ByteDance made more than $3 billion in net profit on over $17 billion in revenue, per Bloomberg, and reportedly 67% of that came from ad sales on its major Chinese apps, including Douyin.
What action has Trump taken against TikTok and why?
For Trump, appearing to be taking a tough stance on China has been central to his re-election campaign.
Last week, he signed an executive order that will force the sale of TikTok to a U.S. company or ban it from the country, issuing another similar order against Tencent-owned Chinese app WeChat.
Trump cited the app’s ties to China as a threat to national security and data privacy, saying that its collection of data on U.S. citizens could “potentially [allow] China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.”
ByteDance must now find a buyer for TikTok before Sept. 21 or pull out of the U.S., its most lucrative market.
What does Trump’s TikTok ban really mean? What will the effect be?
The executive order says that “any transaction” between a U.S. citizen and ByteDance will be banned within 45 days of its issuance. But it remains unclear what such “transactions” actually might be. The order calls on the U.S. Secretary of Commerce, the billionaire financier Wilbur Ross, to define the scope of the ban.
Commentators speculate that Apple and Google’s U.S. app stores would likely have to pull TikTok from their digital shelves and U.S. advertisers would have to cut ties with the app. Eventually, unable to issue software updates, the app would stop working on American smartphones.
Should this version of the order remain unchallenged by the U.S. courts, violating it could result in $300,000 in fines per violation, or even criminal prosecution.
The Trump administration’s unprecedented move of banning an app as popular as TikTok ratchets up the long-brewing tech trade war between the U.S. and China. The U.S. has typically championed an open internet and an open business environment for tech firms to develop and grow. China claims sovereignty to censor web access, which has meant tech giants like Google, Facebook and YouTube don’t operate in the country.
By banning apps with connections to China, Trump is taking a page out of China’s own playbook, potentially paving the way for other countries to block U.S. firms on similar grounds.
Does TikTok pose a legitimate threat to U.S. national security?
ByteDance, like American tech companies such as Facebook, relies on large amounts of user data to make its products more effective. Although tech companies’ control over and use of such reams of private information is hotly contested in America, it is the relationship between politics and private business in China that raises distinct questions for TikTok and other Chinese firms.
China’s 2017 national intelligence law requires all Chinese firms to cooperate with government intelligence services upon request. Under this law, if the ruling Communist Party asks ByteDance to hand over U.S. user data in its possession for political reasons, the company would be unable to refuse if it wished to continue its main China operations.
Chinese authorities make media companies like ByteDance themselves responsible for censoring content on their platforms. Last fall, TikTok came under fire after censoring content abroad that displeased Beijing, such as posts related to the Tiananmen Square protests or Tibetan independence. ByteDance has said old censorship rules have since been phased out for overseas markets, but concerns over what content is promoted — or buried — by its opaque algorithms continue to emerge as new examples of perceived censorship appear, such as on LGBTQ issues or China’s human rights abuses in Xinjiang.
U.S. officials have not provided evidence that ByteDance has shared TikTok U.S. user data with Chinese authorities, and the company has repeatedly denied any allegations that it does so.
Although TikTok has recently begun hiring lobbyists to plead its case in Washington, it has been unable to shake distrust of its inevitable ties back to the Communist Party. Last week, the U.S. Senate unanimously approved a bill to ban TikTok from use on government-issued devices.
In June, TikTok was one of nearly 60 Chinese apps banned in India after the country’s Ministry of Information said it posed a threat to national security. The move came days after a deadly border clash with China.
What has been the response by TikTok and ByteDance to Trump’s executive order?
TikTok last Friday said it was “shocked” by Trump’s ban. It is planning to file a federal suit against the Trump administration over the ban as soon as Tuesday, according to an NPR report, which cited an anonymous source.
The suit will likely argue that Trump’s action was unconstitutional because it did not follow due process in giving the company a chance to respond to allegations, as well as that the national security concerns cited are unfounded.
ByteDance issued a Chinese-language statement that reaffirmed its commitment to going and staying global. The company had faced “all kinds of complex and unimaginable difficulties” in the process of expanding overseas, including culture clashes, tense geopolitics, and “plagiarism and smears” from competitor Facebook, it said, but would “continue to increase our investments in global markets around the world.”
What has the response been in China?
Chinese public opinion has been divided between those who see ByteDance founder Zhang Yiming as a victim of unfair ploys by Trump and those who oppose selling the company on the grounds of national pride. On social media, vocal users have labeled Zhang a “traitor” for succumbing to U.S. pressure to make a sale.
China’s foreign ministry has strongly rebuked the Trump administration for targeting TikTok, while the country’s state-run Xinhua news agency has equated the executive order to “modern piracy.”
ByteDance, however, unlike telecom equipment maker Huawei, is not a firm critical to the Communist Party’s interests that Beijing will go out of its way to protect. Analysts say that Beijing is wary of taking any measures that would make it appear to be meddling in the upcoming U.S. elections. Meanwhile, when it comes to tit-for-tat retaliation, there’s little that Beijing can threaten or do. Apart from Microsoft, most major U.S. tech firms are already banned in China.
What U.S. firm might buy TikTok? What’s the current state of negotiations?
So far, Microsoft has emerged as the leading potential bidder for TikTok and is still the front-runner for a buyout of the app’s operations in the U.S., Canada, Australia and New Zealand.
Twitter also has reportedly discussed a merger with TikTok, and other investors have been said to be interested. But a problem for Twitter is it simply doesn’t have the cash to make the purchase alone. The U.S. platform has a market cap of $29 billion, while TikTok is valued between $15 billion and $50 billion.
Any potential sale of TikTok, however, will be complicated. Barring a legal development overturning Trump’s executive order, a new owner would have to satisfy U.S. officials’ requirements that TikTok does not have any connections with the Chinese government. There’s also the technical issue of separating the code for TikTok from Douyin, as the two apps share common underpinnings.
Disclosure: Variety has received funding from TikTok’s Creative Learning Fund to produce content for the platform.
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