Breaking Down the Proposed US-China TikTok Deal

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1:32Bloomberg Audio Studios. Podcasts, radio, news. Last Friday, President Donald Trump announced that his Chinese counterpart, Xi Jinping, had tentatively approved a deal to save TikTok in the U.S. I had a great call with President Xi, and as you know, he approved the TikTok deal, and we're in the process. Under the proposed agreement, TikTok's U.S. operations would be separated from its Chinese parent company, ByteDance. And a group of new U.S. backers would own a majority stake in the company. This deal is part of a broader push to put the Trump trade war behind them, to re-engage with the U.S.

2:18administration. Mark Anderson is a Bloomberg Asia tech editor based in Hong Kong. The very fact these two men were speaking was very significant. Of course, the relations between China and the U.S. are at one of their lowest points for years. And both leaders are really looking to ratchet down the tension and move on to the next chapter. On Friday, China's foreign ministry stopped short of saying that Beijing had given its final blessing and urged fair treatment of Chinese interests. Is it fully approved the Chinese statements didn't necessarily indicate that? Well, I think so. But when you say fully approved, I don't know what that means.

2:53We have to get it signed, I guess. Most China analysts will tell you that when she goes to those meetings, he sees it as sort of a bow-tying moment. All the work has been done and he is there to bless things. Josh Wingrove is Bloomberg's senior White House correspondent. He's been covering the fight over TikTok since 2020, when then-President Trump signed an executive order calling for its parent company to divest its ownership or face a ban in the U.S. Trump doesn't work that way, right? Trump wants to get in it and hash it a deal himself and leave the fine print to tomorrow or to others. And so that has been just sort of like an up is down, down is up, diametrically a toast approach between the two countries right now.

3:38This is The Big Take Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever-shifting region. Today on the show, we're diving into the TikTok deal between the U.S. and China, what it means for American users, and who gained the upper hand at the negotiating table.

4:10The battle over TikTok's fate in the U.S. has been brewing for years. The app is owned by a Chinese corporation and exploded in popularity with American users back in 2020, during the early days of the COVID pandemic. Hey everybody, welcome to my TikTok page. Okay then, what dance should I try first? I love TikTok. Since then, TikTok has experienced the type of growth most tech companies can only dream of. It has more than 170 million users in the U.S. alone. That's half of the population. And its parent company, ByteDance, is valued at more than$400 billion, making it the most valuable private business in China.

4:56Now, to U.S.-based users, the app feels so American. It's widely popular with Gen Zs, and it created a new class of entrepreneurs, influencers who've turned their Internet hustles into full-time careers. Here's how much I made it off of social media as a college student who has$20 ,000 on TikTok. If you want to go viral here on TikTok, you're going to do these four things. But the app is very much not American. And Bloomberg's Asia Tech editor Mark Anderson says that's a big part of the problem. U.S. lawmakers have long been concerned that TikTok could be used to spy on American citizens. This stems from the fact that China requires its companies to share national security data with its government.

5:40So U.S. officials are worried that China's government could abuse the data of U.S. TikTok users. You know, they could collect dossiers of personal information. They could blackmail them. They could exploit content preferences. And a lot of concern about political interference during the election season. Especially in U.S. elections, yes. Critically in the 2020 U.S. election, TikTok was a very powerful platform. It's worth noting that Donald Trump personally benefited from this. And there have been studies that have shown that his ticket was boosted by TikTok. So I think for him, it's a personal issue.

6:17I've had more people say, could you try to keep TikTok alive? I use TikTok. I mean, I have to admit it in the election. And look how I did with you. No Republicans come close. Today, President Trump is a TikTok advocate. But in his first term, he pushed for a ban, calling the app a threat to national security. That sentiment was echoed by President Biden, who signed a law requiring ByteDance to either sell TikTok or discontinue service in the U.S. The Supreme Court upheld that ban and put the fate of the app back in Trump's hands. President Trump has been deferring enforcement of that law by executive action, And no one really seems spun up about it, but it also does not seem clear that he has ironclad legal authority to do it.

7:03Bloomberg's Josh Wingrove and Mark Anderson say what's become clear in recent months is that Presidents Trump and Xi are looking for a solution for TikTok and for opportunities to ease tensions between the two countries. The drama over Trump tariffs reaching up to 145 % is still very fresh in the mind for Xi Jinping, who's very much trying to change the relationship in a way that benefits Beijing and possibly divest TikTok at a crucial moment that helps him navigate the next chapter in an advantageous way and secure better terms for Chinese exports to the U.S. What do we know about the agreements that were reached on TikTok so far?

7:47What we know about the deal so far is that Oracle, the software giant, will take a major role in leading a consortium that will also include Anderson Horowitz and Silver Lake Management. They will have an 80 % or more ownership stake in TikTok US, as required by a law that was passed last year in the United States. ByteDance, the owner of TikTok at the moment, must reduce its stake to 20 % or less. On top of that, the White House says this new U.S.-only TikTok will be controlled by a board with seven members, six of whom will be American. In an interview with Fox News, Trump suggested that Michael Dell and the family behind Fox Corp, specifically Lachlan Murdoch and his father Rupert, may also be involved in the TikTok takeover.

8:35I hate to tell you this, but a man named Lachlan is involved. You know who Lachlan is? That's a very unusual name, Lachlan Murdoch. Mr. Murdoch. I believe, and you call him, and Rupert is probably going to be in the group. I think they're going to be in the group. Then there's the platform itself. While it's not clear yet whether users will have to download a new app or update their existing one, Mark says TikTok will create a new platform for users in the U.S. The deal will create a new entity, a new app that users will migrate to, and it will recreate the algorithm. So I think the new owners are hoping for as little disruption as possible to the user experience that these 170 million people know and love.

9:20And of course, the algorithm has been such a huge point of contention, right? This is what is used by TikTok to suggest stories, suggest reels for people to watch, right? The algorithm is a key sticking point for this deal. The U.S. law that was passed in 2024 says ByteDance must give up complete control of the algorithm and the technology that supports the algorithm if it's going to keep TikTok alive in the country. But from the very beginning of these talks about deal, and as recently as a few weeks ago, the Chinese government has said it refuses to do that. Most social networking platforms rely on users to share content with each other.

9:58What TikTok did that's so revolutionary is they created a way for the app itself to suggest content to users through their recent activity and their declared interests. So it really allows people to interact with a platform completely on their own without any friends in the real world. A Beijing official said that ByteDance has agreed to license its algorithm to the new U.S. version of the TikTok app. But that's not giving up complete control. So while Xi and Trump may decide that's good enough, it may not comply with U.S. law. Under the proposed deal, TikTok's U.S. owners would lease a copy of ByteDance's algorithm, and Oracle would help recreate and retrain it from the ground up.

10:44Oracle would also provide security for the algorithm and store data from U.S. users in a secure cloud. The White House says ByteDance will not have control over or access to any information or algorithm in the U.S. So basically what they're trying to do is ensure that American buyers actually do control the recommendation software behind TikTok in the U.S. And this gets to a key concern by U.S. lawmakers over the past few years, really, which is that Chinese companies are mandated by law to share user data with the Chinese government. Coming up, what this means for U.S.-China relations and who gained the upper hand at the negotiating table.

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14:18There was a lot at stake for both the U.S. and China in the negotiations over TikTok. Mark Anderson says it's a toss-up who came out on top. I think you could say it's a win-win. The U.S. gets a key concession from China that it's been seeking for years. And China, within the broader context of tariffs, geopolitical tensions, and the AI race, Beijing might start to see TikTok as a bargaining chip to get a better deal. and other possibly more critical areas. Remember, Beijing and Washington are due to resume trade talks, and there are many other issues on the table that both sides need to hammer out.

14:54Fentanyl, nuclear proliferation, access to AI technology, these are just a few of the bigger issues on display here. But Bloomberg's White House correspondent, Josh Wingrove, says TikTok and the national security alarms it raises seems to be a bigger concern to Washington than Beijing. I think both sides think they have leverage, But it sure seems like the Chinese certainly do, if only because Trump is backing off what had been a position of his. And we're seeing China able to squeeze in key sectors in a way that is alarming the U.S. Now, that might be a wake up call for both parties, I should note.

15:31Some of these issues were simmering under the Biden administration. but it's pretty clear that China realizes what the pressure points are and is willing to press on them if needed and President Trump chiefly through tariffs but not just through tariffs through export controls and otherwise also is doing that and that is I think the tension right now in particular in the Republican Party is like how far is too far and how much deal making is okay. Trump's heading into a midterm election does not want tariffs showing up on everyone's receipts, left, right and center. So right now, the bar to make a deal with Trump seems to be shifting.

16:09Japan, Korea, EU have made deals, UK, China seems to be really driving towards one, or at least driving towards some sort of medium term certainty. Using TikTok almost is like a thin edge of the wedge to get people to the table. But the jury is very much out and no one knows where it's going to land with China. Most of the details of the TikTok deal have come from the US. China has been largely silent. Still, Mark says it's a positive sign, an indication that the two superpowers are willing to sit down and talk business. According to Trump, Chinese President Xi Jinping has approved the deal. But so far, Beijing has only really issued broad statements without directly referring to any deal, saying it respects the wishes of the company and is glad to see business negotiations in line with market rules.

16:58just very general language that doesn't indicate any kind of imminent signing of a deal. However, they were very positive about the fact that Trump and Xi were talking. They called the phone call a pragmatic, positive and constructive talks. So I think that sort of indicates the general feeling in Beijing, which is that this deal is part of a broader push to move closer to the U.S., to put the Trump trade war behind them. Mark, just before the phone call took place last week, Trump reportedly halted more than $400 million in military aid to Taiwan. That's according to The Washington Post. Now, we don't know if that move is connected to the TikTok deal, but still, that's a significant development on its own.

17:43How are people reading that? I think it's part of Trump's transactional diplomacy. We've seen it in Europe with NATO. But of course, it serves his purposes of appeasing a key Chinese demand as the talks for this TikTok deal are taking place. So I would view it as possibly part of Trump's art of the deal and also part of his transactional diplomacy, where he expects even the most key U.S. allies to pay their own way on defense. We know that Beijing views Taiwan as an inseparable part of its Chinese territory. and U.S. officials have said that she wants the Chinese military to be ready to invade Taiwan by 2027.

18:21If the U.S. support for Taiwan is now on the table, and that's obviously a big if, that would be a huge win for China. Yeah, the U.S. is by far Taiwan's most important foreign ally. And I think Taiwan has been reading the writing on the wall and it's been ramping up its own defense commitments in part to placate Trump and his transactional approach to their relationship. Taiwan's president has announced plans to increase military spending and approve special funding to acquire more drones and ships. So I think those are the kinds of overtures that Trump wants to see from Taiwan right now. He wants to see them taking defense into their own hands and maybe not relying on the U.S.

19:00as much as they used to. He wants to be seen as a harder sell. He wants to negotiate and get better deals for the U.S. by posturing and making countries think twice before counting on support from Washington. Mark, this deal strikes me as very much of a Trump deal, right? An art of the deal agreement. But it doesn't seem as if people are really up in arms about that, that it's so transactional with everything on the table up for negotiations. Let's not forget that Trump is a master at messaging. And I think the messaging here is very good for the people he cares about the most in the U.S., which are, of course, voters in his base.

19:38He can say, I went to China, I went to President Xi Jinping, and I extracted a deal that couldn't have been struck under Joe Biden. I was able to get them to concede on a number of critical points. I was able to get the algorithm essentially copy and pasted. And now under American ownership, I was able to get six out of seven seats on the board for Americans. I think for him, it looks really good. And I think he knows what he's doing when it comes to selling this deal to Americans and to his base. How does it then make Xi look? For me, I think it makes Xi look like he's more concerned with the next 10 years than the next six months.

20:18He's playing a very long game here. He senses an opportunity with Trump, like many other leaders, I think. He sees this transactional, very short-term focused American president. How many of those do you get in your lifetime? So I think for him, maybe TikTok was the price to pay for a better tariff deal or a Better deal on rare earth magnets, better deal on access to Boeing airplanes. These are the more important issues to the Chinese government. But Josh says whether the TikTok deal could serve as a blueprint for how Chinese companies might strike future deals with Washington remains to be seen.

20:53I think it's unclear right now. For instance, Trump hasn't watered down restrictions on Chinese electric vehicles that carry similar national security risks to a lot of folks. But it does seem like everything's sort of on the table, right? And one thing we've also seen is on semiconductor chips, this real transactionality, right? Trump allowing the H20 chip to be sold to China, but only so long as the U.S. government gets a 15 % cut of each of those sales. So like the hawk view is sort of shifting a little bit, it seems, in Washington right now, where there are certain things aren't budging, like cars, farmland, whereas other things maybe are more up for negotiation than we knew.

21:35And so I think basically as all things with Trump, anything can be a negotiation at the right price. It is consistent that Trump sees like revenue sources potentially for the U.S. government in this, but of course has been criticized by Vice President Mike Pence, his former Vice President and others, not just Democrats, that this is pushing the U.S. government too much into the realm of private business and that we're really sort of headed to like a state-run model in certain key sectors now more than it has been palatable for Republicans in the past.

22:09This is The Big Take Asia from Bloomberg News. I'm Wan Ha. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you liked the episode, make sure to subscribe and review The Big Take Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening. See you next time.

23:00We'll see you next time. more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation. Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. Bill, why is my eye twitching? Does this mean I'm in perimenopause? Where's my phone? Juliana, maybe we can ask an actual human. Yes, because I have questions, and I bet you do too. Like, is it normal to sleep in separate bedrooms? We do that.

23:33And I still need to know why my poop's been green. We've got actual people answering these exact questions. Listen to Bill and Juliana. The podcast. On the iHeartRadio app, Apple Podcasts, or wherever you listen to your podcasts.

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