A TikTok deal that will delight China
After four extensions of the legal deadline to ban TikTok or force its Chinese owners to divest, US President Donald Trump has signed an executive order making the app US property. The announcement comes after years of diplomatic wrangling, bureaucratic maneuvering, repeated efforts by federal and state governments to restrict the platform, and even a ruling by the US Supreme Court. Has the fate of America's most viral social media app finally been decided? Those expecting a shutdown will be disappointed. This latest "framework consensus" still leaves China with significant influence over TikTok. What looks like a victory for the US may be Chinese President Xi Jinping's greatest strategic triumph.
At first glance, the deal looks like a bargain for the US. Oracle and a consortium of US investors would control 80% of a newly created US entity that would manage TikTok's US operations. All US user data would remain on Oracle's servers in Texas, and the new company would license TikTok's prized recommendation algorithms and retrain them with US data. Six of the seven seats on the entity's board of directors would be held by Americans. In other words, American data and TikTok's servers and algorithms would appear to be firmly under US control. And the deal even carries financial rewards for the Trump administration, in the form of a multi-billion-dollar payout from investors (effectively, a commission for intervening in the deal with the Chinese).
However, a closer look reveals a less reassuring picture. After all, global investors already own roughly 60% of ByteDance, TikTok's parent company, the company's founders own another 20%, and employees own the remaining 20%. The deal, then, simply raises US ownership of the operation to 80% and leaves ByteDance with just under 20%, though it remains the largest shareholder. More tellingly, the intellectual property of TikTok's algorithms remains in ByteDance's hands. Far from directly acquiring the recommendation engine, Oracle and other US investors only receive a licensed copy.
Algorithms are not static assets. Unlike a car or a house, they cannot be transferred once and for all. They are dynamic, data-driven systems that require constant retraining, fine-tuning, and significant engineering support to remain effective. Oracle can inspect the code, copy it in its entirety, and retrain the licensed version with US data, but the new US TikTok will still rely on China for regular updates. This raises difficult questions: Does Oracle receive these updates? And, if so, can it meaningfully monitor and audit them?
Undoubtedly, what makes an algorithm powerful is not only its architecture, but also the data it is trained on. However, since the US version will rely solely on US user data, Oracle will not have access to the vast global dataset that makes ByteDance's cutting-edge models so powerful.
China, for its part, will have the legal leverage to restrict or impose conditions on any technology transfer from ByteDance. Since 2020, China has classified personalized recommendation algorithms as essential technology under its export control regime. This means that any export of TikTok algorithm updates or improvements is subject to Chinese government approval. Chinese authorities can therefore turn TikTok into a diplomatic tool. If tensions escalate around Taiwan, tariffs, Ukraine, or Nvidia chip export restrictions, China could delay or withhold licensing approval, using TikTok as another bargaining chip. In this way, the platform has become a powerful instrument of Chinese diplomacy.
Faced with a licensing agreement governed less by legal terms than by shifting geopolitical winds, American investors in the new TikTok should prepare for greater uncertainty. Rather than shifting control of TikTok from China to the United States, this agreement merely replaces one form of dependency with another.
Yes, ByteDance will no longer oversee daily content recommendations; Oracle will, alleviating the US government's more immediate security concerns. But China will retain residual control over TikTok's algorithms. It will be free to set the scope of the license, determine the frequency of updates, and decide whether the US version can keep pace with the global version. Far from diminishing China's influence, the deal risks consolidating it.
With this agreement, fears of Chinese access to Americans' data or direct manipulation of the algorithms may fade. But it will be replaced by a more subtle and lasting risk: technological dependence on China, which has stifled TikTok's powerful recommendation engine. The Trump administration has simply traded one vulnerability for another. That said, a less competitive US version of TikTok might not be bad for the United States. Some might even see it as a blessing in disguise. A less competitive TikTok would be a less addictive TikTok. Ultimately, this would benefit American teenagers, whether they realize it or not.
Copyright Project Syndicate
