On the first day of Donald Trump's second term as President of the United States on the 20th of last month (local time), he signed an executive order to suspend the implementation of the 'TikTok ban law' for 75 days instead of imposing tariffs on China as he had previously warned. The TikTok ban law states that if ByteDance, the parent company of TikTok, does not sell its business rights in the United States to American corporations within 270 days, its services will be banned in the United States. While Trump granted TikTok a brief reprieve, he emphasized that 50% of the equity must be transferred to American corporations. He threatened, saying, 'If China refuses the transaction, it will be considered a hostile act and tariffs will be imposed,' adding, 'The tariffs could rise up to 100%.'
With 170 million users in the United States alone, the Chinese short video platform TikTok has emerged as a key factor in the newly intensified U.S.-China conflict following the inauguration of the Trump administration. The United States is focusing on the potential flow of vast amounts of information into China through TikTok, which poses a threat to national security and could also serve as a catalyst for China to gain an advantage in technological competition. China has maintained its opposition to TikTok's equity sale, stating, 'We respect and protect the legitimate rights and interests of enterprises.' However, with Trump's tariff bomb potentially pushing China into a recession, predictions suggest that China may engage in a tug-of-war over TikTok. This article explores how TikTok became at the forefront of the U.S.-China power struggle.
◇ TikTok's security threat rose sharply since 2019
TikTok began to draw the ire of the United States starting in 2019, during Trump's first term. The Peterson Institute for International Economics, a prominent U.S. think tank, released a report in January of that year that strongly criticized ByteDance. The report indicated the possibility that the personal information of 40 million American users may have been transferred to China via TikTok. Given that U.S. military personnel also use TikTok, it was pointed out that their information could be used in Chinese espionage activities. A month later, in February, the U.S. imposed a fine of $5.7 million (approximately 820 million won) on TikTok for illegally using personal information of children under the age of 13. ByteDance immediately acknowledged the charges and paid the fine in an effort not to antagonize the U.S.
TikTok's popularity soared to new heights. At that time, The New York Times (NYT) reported that TikTok clubs were being created in U.S. high schools, and teachers were joining TikTok to communicate with students. As TikTok's presence grew, figures began to emerge who were on the attack. Senate Majority Leader Chuck Schumer of the Democratic Party and Senator Tom Cotton of the Republican Party were among them. In October 2019, they demanded that the U.S. National Intelligence Agency investigate TikTok's security risks, citing that 'TikTok is a potential counterintelligence threat that we cannot ignore.' They noted that 'Chinese law could compel individual companies to support and cooperate with Communist Party information operations.' A few days later, the Committee on Foreign Investment in the United States (CFIUS), under the U.S. Treasury Department, initiated an investigation into whether ByteDance's acquisition of the social media app Musical.ly for $1 billion (approximately 1.4 trillion won) in October 2017 posed a national security threat. The U.S. Army, which had also received Schumer's letter, began a similar investigation. At that time, the U.S. Army was using TikTok as a recruitment tool.
ByteDance explained, 'The information of American TikTok users is stored in the United States, and the data is also kept in Singapore.' In May 2020, it also recruited a senior executive from Walt Disney as its Chief Executive Officer (CEO). This was intended to shed the image of being a Chinese company and emphasize that it complies fully with U.S. laws and regulations. They actively cooperated with the CFIUS investigation and proposed to create 10,000 jobs in the U.S. over three years. However, this was not enough.
◇ Attempts to force TikTok to sell also occurred during Trump's first term
On July 31, 2020, Trump dramatically declared, 'We will ban TikTok in the U.S.' and added, 'I will sign the paperwork tomorrow (August 1).' However, just a few days later, he changed his mind. He informed ByteDance to 'sell TikTok's business within 45 days.' This was the first attempt to force TikTok to sell. The leading candidate for acquisition was Microsoft (MS). For ByteDance, not selling TikTok's U.S. entity would mean being kicked out, forcing them to sell at a bargain price. The results of the CFIUS investigation, which had started a year earlier, also came out at this time, bolstering Trump's position. CFIUS recommended that all TikTok assets in the U.S. be sold to prevent the misuse of American users' personal information, and Trump signed an executive order again setting a deadline of 90 days for the sale.
However, negotiations for the sale did not proceed quickly. This was due to China including technologies such as content recommendation and big data collection in its 'export control technology list.' If ByteDance sold the TikTok business to an American corporation, it would have no choice but to violate its own country’s regulations. Ultimately, ByteDance rejected Microsoft's acquisition offer. Following this, Oracle, a cloud computing company, stepped in. Negotiations progressed with Oracle managing TikTok's U.S. data and acquiring some equity. However, in February 2021, negotiations between the two companies finally fell apart. With Trump failing to be reelected, ByteDance no longer had any reason to sell TikTok.
Even under the Biden administration, scrutiny of TikTok continued. While the forced sale executive order that Trump signed in June 2021 was rescinded, a systematic analysis of security risks posed by TikTok and other foreign tech apps began. ByteDance reiterated its promise to store American user information within the U.S., but it was deemed insufficient. Ultimately, in December 2022, the Senate passed a bill banning TikTok's use on government devices, and in March 2023, the House of Representatives passed a plan granting Biden the authority to ban TikTok usage. At that time, the Republican House Foreign Affairs Committee Chairman Michael McCaul stated, 'TikTok is a spy balloon penetrating smartphones.'
However, completely blocking access to TikTok in the United States proved difficult. This was due to concerns that unilaterally banning TikTok would conflict with users' constitutional freedoms in the U.S. Eventually, last year in April, the 'TikTok ban law', which would prohibit services in the U.S. if TikTok's business rights were not sold to American corporations within 270 days, passed the Senate. On the deadline for the sale on the 19th of this month, TikTok downloads and services in the U.S. ceased. The next day, Trump appeared as a savior and called for a '75-day suspension.'
◇ TikTok designated as 'the second Huawei'… Attention on whether ByteDance will seek to sell
If the Huawei Technologies Co., Ltd., the largest Chinese telecommunications company, was at the center of the U.S.-China power struggle during Trump's first term, analyses suggest that TikTok has taken its place during the second term. It may be more urgent for Trump to acquire TikTok’s equity than to impose tariffs on Chinese imports. The Financial Times of the U.K. noted, 'On his first day in office, Trump did not impose a 60% tariff on Chinese imports as promised during the campaign, which signaled a new phase in the trade war with China.' It added, 'The move to withhold tariffs on China appears to be a negotiation card for the TikTok transaction.'
Trump mentioned, 'I am thinking about saying to someone who buys TikTok, if they give (equity) half to the U.S., we will grant them a business license,' referring to the potential acquisition by Tesla and Oracle. Although potential buyers had indicated that ByteDance had shown no intention to sell TikTok until now, the temporary reality of TikTok's service suspension in the U.S. has reportedly increased expectations that their position might change.