TikTok Staves Off Ban After Trump Gives Nod to Partnership Deal

TikTok Staves Off Ban After Trump Gives Nod to Partnership Deal
The TikTok app is displayed in the App Store on an Apple iPhone in Washington on Aug. 7, 2020. (Drew Angerer/Getty Images)
Eva Fu

President Donald Trump approved a partnership deal in principle that would allow TikTok to operate in the United States, even though it appeared to conflict with his initial order for China’s ByteDance to divest the video app.

“I have given the deal my blessing,” Trump told reporters at the White House on Sept. 20 before departing for a campaign rally in North Carolina. “I approved the deal in concept.”

Under the agreement, ByteDance, TikTok’s Beijing-based parent company, will create a new company headquartered in the United States to operate the popular video sharing app, with the promise of bringing 25,000 job opportunities. The new company is planning a U.S. initial public offering within a year.

“Conceptually, I think it’s a great deal for America,” Trump said, adding that the new structure will “most likely be incorporated in Texas.”

Trump signed an executive order on Aug. 14 giving ByteDance 90 days to sell TikTok. The deal announced on Saturday, however, is structured as a partnership rather than a divestment.

The plan would see Oracle and Walmart holding a 12.5 percent and 7.5 percent stake respectively in TikTok Global. It would consist of four Americans out of five board members, the companies said in a statement. ByteDance will reportedly still hold an 80 percent ownership of the company. Given that U.S. investors own around 40 percent of Bytedance, the new company could be described as majority American owned, an unnamed source told Reuters.

It was not immediately clear what had caused the White House compromise, but terms in the proposed partnership deal, such as the job creation, would appeal to Trump’s “America First” policy. The Trump campaign also likely wants to avoid turning away the largely young user base that TikTok has garnered ahead of the November election.

The Committee on Foreign Investment in the United States, a government agency tasked with scrutinizing foreign transactions for national security concerns, will need to review before the deal can go through.

The agreement will make Oracle the “trusted cloud and technology provider responsible for fully securing our users' data,” TikTok said in a statement. TikTok Global, according to Oracle’s CEO Larry Ellison, will run on Oracle's new Generation 2 Cloud infrastructure, which he claimed would be “much faster, more reliable, and more secure than the first generation technology currently offered by all the other major cloud providers.”

“We are a hundred percent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users, and users throughout the world,” Ellison said in a statement.

TikTok Global is also creating an education initiative to set up an AI-driven online video curriculum that ranges from basic reading to math, science, and computer engineering to teach American children, according to Walmart. Trump on Saturday said they will set up “a very large fund for the education of American youth,” with a $5 billion contribution from the TikTok deal.

“That’s their contribution that I’ve been asking for,” Trump said.

ByteDance, acknowledging plans for the online classroom projects, disputed the funding amount later in a post on Toutiao, an AI-powered news aggregator owned by the company.

 A woman walks past the headquarters of ByteDance, the parent company of video sharing app TikTok, in Beijing on Sept. 16, 2020. (Greg Baker/AFP via Getty Images)
A woman walks past the headquarters of ByteDance, the parent company of video sharing app TikTok, in Beijing on Sept. 16, 2020. (Greg Baker/AFP via Getty Images)

“To clarify, we also just heard from news about the $5 billion education funding from news,” it said.

The Walmart statement mentioned TikTok Global “will pay more than 5 billion in new tax dollars to the U.S. Treasury,” without going into details.

In early August, Trump issued another executive order barring U.S. transactions with TikTok from Sept. 20, citing national security. The order said the app’s Chinese ties could threaten to give Chinese regime access to millions of U.S. users’ data, “potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.”

Acting on the order, the Commerce Department on Friday issued rules banning U.S. app stores from carrying TikTok from late Sunday, but later postponed this start date for one week due to Trump green-lighting the deal.