Trump Moves to Secure TikTok‘s U.S. Operations Amid National Security Concerns

In a significant development for the popular video-sharing platform TikTok, President Donald Trump has taken steps to facilitate a deal that would allow American investors to acquire the app’s U.S. operations from its Chinese parent company, ByteDance Ltd. This initiative, which could be valued at approximately $14 billion, aims to address ongoing national security concerns regarding data privacy and foreign influence.

Executive Order and National Security Law

On Thursday, Trump signed an executive order at the White House, asserting that the proposed transaction aligns with a 2024 law mandating ByteDance to divest its control over TikTok or face a ban in the United States. The president emphasized that he had received approval from Chinese President Xi Jinping for the deal, stating, “I had a very good talk with President Xi. We talked about TikTok and other things, but we talked about TikTok and he gave us the go-ahead.”

This executive order marks a pivotal moment in the ongoing saga of TikTok’s operations in the U.S., which have been under scrutiny for potential risks to user data security. The proposed arrangement would create a new U.S.-based entity primarily owned by American investors, reducing ByteDance’s stake to less than 20%, in compliance with the national security law.

Safeguarding User Data

Trump and other officials have underscored that the agreement is designed to protect American users’ data. Oracle Corp. has been designated to manage user information in a secure cloud environment, ensuring that the app’s recommendation algorithm remains insulated from foreign interference. This move is part of a broader strategy to alleviate fears surrounding data privacy, which have been a focal point of discussions about TikTok’s operations in the U.S.

Despite Trump’s endorsement, the deal’s future remains uncertain, particularly as China has not publicly confirmed its approval. The Chinese embassy did not respond to inquiries following Trump’s announcement, leaving many questions unanswered.

Composition of the Buyers Group

Key details about the buyers group involved in the transaction are still emerging. Reports indicate that Oracle, Silver Lake Management LLC, and the Abu Dhabi-based investment firm MGX are in negotiations to invest in TikTok’s U.S. operations and secure board positions in the new venture. However, these discussions are still fluid, and the final composition of the buyers remains to be seen.

The valuation of the new U.S. entity has also been a topic of debate. Vice President JD Vance, who has played a crucial role in shaping the deal, stated that the transaction would value the U.S. operations at around $14 billion. This figure is significantly lower than earlier estimates, which had placed the value between $35 billion and $40 billion. Analysts have noted that determining TikTok’s worth is complicated due to uncertainties surrounding the technology and the app’s highly sought-after content algorithm.

Advertising Revenue and Market Dynamics

According to Jasmine Enberg, a principal analyst at eMarketer, the $14 billion valuation aligns with projections for TikTok’s expected advertising revenues in the U.S. by 2026. “Advertising is TikTok’s core line of business in the U.S., and there are still many unanswered questions about how the new business will operate,” Enberg remarked.

The executive order grants the involved parties 120 days to finalize the deal, marking the fifth extension granted by Trump. This extension raises questions about the enforcement of the divest-or-ban law, which initially allowed for only one pause. The deadline for closing the deal is set for the end of January, more than a year after the law took effect.

Congressional Scrutiny

The president’s actions have set the stage for potential confrontations with U.S. lawmakers, many of whom remain skeptical about whether the emerging deal meets the legal requirements outlined in the 2024 law. Members of Congress have expressed their intent to scrutinize the agreement, particularly regarding ByteDance’s control over TikTok and its recommendation algorithm.

Representative Raja Krishnamoorthi, the leading Democrat on the House Select Committee on the Chinese Communist Party, stated, “If a deal has been struck, the details need to be shared with Congress.” His Republican counterpart, Representative John Moolenaar, has also indicated plans to discuss the transaction with the involved parties to ensure compliance with legal standards.

Algorithm Management and Data Security

Under the proposed arrangement, the new U.S.-based TikTok would lease a copy of the algorithm from ByteDance, which would then be retrained under Oracle’s supervision. This process aims to ensure that the algorithm is not used for malicious purposes or influenced by foreign entities. Oracle’s role would include inspecting the retrained algorithm to verify its functionality and security.

User data from U.S. subscribers would be stored in a secure cloud managed by Oracle, with stringent controls to prevent access from foreign adversaries, including China. ByteDance would not have access to this information, a move designed to alleviate longstanding concerns among U.S. authorities.

This approach bears similarities to Project Texas, a multibillion-dollar partnership proposed by TikTok to the Biden administration in 2022. Under this initiative, Oracle would have been tasked with separating and securing TikTok’s U.S. user data from Chinese oversight. However, the U.S. government ultimately rejected this proposal as an adequate solution to national security concerns.

China’s Response and Future Implications

The Chinese government has expressed a willingness to see productive negotiations that comply with its laws and regulations. The Chinese foreign ministry stated, “The Chinese government respects the wishes of the company in question and would be happy to see productive commercial negotiations in keeping with market rules lead to a solution that complies with China’s laws and regulations and takes into account the interests of both sides.”

As the situation unfolds, the implications of this deal extend beyond TikTok itself. It reflects broader tensions between the U.S. and China regarding technology, data privacy, and national security. The outcome of this transaction could set a precedent for how foreign-owned tech companies operate in the U.S. and how governments navigate the complexities of global digital commerce.

Conclusion

The proposed acquisition of TikTok’s U.S. operations by American investors represents a critical juncture in the ongoing discourse surrounding data security and foreign influence in the digital age. As the deal progresses, it will be essential to monitor the responses from both U.S. lawmakers and the Chinese government, as well as the implications for the broader tech landscape. The outcome of this transaction could reshape the future of TikTok and influence how similar situations are handled in the future.