What obstacles may a US-China TikTok deal face?

The U.S. and China announced a framework agreement Monday that would transfer ownership of the short-video app TikTok to the United States. However, there are questions and potential obstacles surrounding the agreement, including whether it will adhere to a 2024 law. In Madrid after trade discussions, U.S. and Chinese officials announced the transaction in principle, but they did not provide specifics or address important questions like whether China would consent to transfer control of the Algorithm that makes the app so popular with 170 million Americans.

WHAT IS THE ALGORITHM DOING?

In earlier talks, Chinese officials showed a great deal of hesitancy to permit the export of TikTok’s recommendation algorithm, which is regarded as ByteDance’s most valuable asset and a major factor in the app’s widespread appeal.

China revised its export control regulations to include technologies like recommendation algorithms in 2020, when the Trump administration initially sought for the sale of TikTok’s U.S. business. This effectively gave the government influence over any transfer.

WILL CONGRESS NEED TO APPROVE THE DEAL?

Because of concerns that TikTok’s U.S. user data could be accessed by the Chinese government and enable Beijing to spy on Americans or carry out influence operations through the app, the Republican-controlled Congress may need to approve any agreement. In 2024, the Congress passed a law requiring ByteDance to Divest TikTok or face a Ban in the United States. U.S. President Donald Trump has three times delayed the law’s enforcement deadline since it went into effect. Some Democratic lawmakers argued Trump had no legal authority to extend the deadline and suggested a previous deal under consideration in April would not meet legal requirements.

In February, Attorney General Pam Bondi informed Apple, Google, and other service providers and TikTok hosts in letters that the Justice Department was dropping any legal claims for possible infractions. In June, they were released to the public. A congressional aide told Reuters on Monday that lawmakers plan to scrutinize the latest deal when it is made public to see if it complies with the law.

WILL CHINA CONTINUE TO OWN ANYTHING?

One issue is whether ByteDance will be fully divested from TikTok U.S. after the deal.

Trump responded to a question in an Oval Office press conference on whether China will have stake in TikTok: “We haven’t decided that, but it looks to me and I’m speaking to President Xi on Friday for confirmation.” Senate Intelligence Committee chair Tom Cotton in April said American investors who wanted to buy TikTok must cut all ties with China.

American companies Susquehanna International Group, General Atlantic, KKR, and Andreessen Horowitz are now ByteDance’s stockholders.

There might not be much that Trump can do if Congress rejects the most recent agreement. The bill was signed by former Democratic President Joe Biden and enacted by an overwhelming bipartisan majority in Congress last year. In January, the Supreme Court unanimously decided that the measure did not violate the First Amendment’s guarantee against government censorship of free speech.

After the divestment, who will be in charge of TikTok?

Officials predict that the final agreement will closely resemble the terms of the April agreement, which called for TikTok’s U.S. operations to be spun out into a new company established in the United States that would be mostly owned and run by American investors. After Trump announced high tariffs on Chinese imports, China said it would withhold its consent, which caused this to stall. It’s still unclear exactly how the new expected ownership will be structured.