Trump suddenly turns against TikTok’s delicate deal

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President Trump is scheduled to meet with advisors Thursday to review a proposal that would enable TikTok, the wildly popular Chinese-owned short video app, to continue operating in the United States by entering into a “trusted technology partnership” with Oracle Corp., the world’s second-largest software maker.

The proposed partnership, floated over the weekend, had seemed an ingenious solution for extricating the app, which counts more than 100 million American users, from a high-stakes standoff between Washington and Beijing.

Trump initially hinted his support for the idea. But late Wednesday, he signaled a TikTok backtrack.

“Just conceptually, I can tell you I don’t like that,” Trump said after a reporter told him that under the proposed deal, TikTok’s owner, Beijing-based ByteDance, would retain majority ownership of the venture, with Oracle taking only a minority stake.

“I’m not prepared to sign off on anything,” Trump said.

The Wall Street Journal reported Wednesday that a group of Trump officials led by Treasury Secretary Steven Mnuchin, and in consultation with unnamed U.S. investors, is pushing an alternative plan that might involve selling substantial stakes in TikTok to Oracle and Walmart Inc., then taking the company public to assure U.S. ownership exceeds 50%.

TikTok’s future has dangled in the breach since last month when Trump, citing national security concerns, vowed to ban the app in the U.S. market unless ByteDance sold TikTok to American owners and surrendered the “Made in China” algorithms that makes the app so popular. Trump’s edict provoked a public outcry in China. Beijing made clear to ByteDance founder Zhang Yiming that it opposes a forced sale. On Aug. 28, the Chinese government expanded the nation’s commercial code to include new restrictions on the export of artificial intelligence.

Oracle’s original solution to TikTok’s predicament, crafted with help from the venture’s American investors, called for transferring TikTok U.S. users’ data to cloud servers run by Oracle. The Redwood City, California-based software giant would vouch for the privacy TikTok user data and guarantee that it remained inaccessible to Chinese authorities. The plan envisioned Oracle as a minority shareholder, thus mollifying Beijing.

It helped, too, that Oracle founder Larry Ellison has been a high-profile fund-raiser for Trump, and that Oracle CEO Safra Catz served on Trump’s transition team. In a speech in Arizona on Tuesday, Trump praised Ellison and said a deal was close. “He’s been, really, a terrific guy for a long time,” Trump said. “So we’re going to take a look.”

Trump trade adviser Peter Navarro, a vocal proponent of banning TikTok instead of orchestrating its sale, has refrained from criticizing the Oracle proposal.

But then Wednesday, even as the Committee on Foreign Investment in the United States, the interagency panel that vets deals for national security concerns, reviewed the proposal, support seemed to unravel. Six Republican senators urged Trump to reject the proposal. Sen. Marco Rubio (R–Fla.) said he had “serious questions” about Oracle’s role and how much control the arrangement would give the American company over the app’s algorithms.

“We remain opposed to any deal that would allow China-based or controlled entities to retain, control or modify the code or algorithms that operate any U.S.-based version of TikTok,” Rubio wrote in a letter to the administration.

Sen. Ted Cruz (R–Texas) separately argued that the Oracle deal “failed to meet the intent of the president’s executive orders” and “raises serious national security concerns.” Bloomberg reports that Secretary of State Mike Pompeo also opposes the deal.

It’s hard to imagine that the Mnuchin alternative, as described by the Journal, will find favor in Beijing. Nor has China’s leadership demonstrated much sympathy for Zhang’s dilemma. This week, while TikTok and its investors scrambled to convince policymakers in Washington that TikTok is an independent subsidiary and would refuse to surrender data or manipulate its algorithms if ordered to do so by the Chinese government, China’s state-controlled press stepped up calls to strengthen Communist Party control of the nation’s growing private sector.

Guidelines issued by the General Office of the party’s Central Committee on Tuesday urged the United Front, an umbrella organization aimed at influencing party control, to “strengthen ideological guidance” and “create a core group of private sector leaders who can be relied on during critical times.”

In this week’s Eastworld Spotlight conversation, Gavekal Research technology analyst Dan Wang argues that, in the face of U.S. moves against TikTok, Huawei Technologies, and other provocations, Beijing has demonstrated remarkable restraint and seems keen to avoid being dragged into a downward spiral of tit-for-tat retaliation before the U.S. presidential election in November. The reason, he contends, is that Chinese leaders recognize there are few U.S. corporations in China that Beijing could target without hurting the Chinese economy.

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Clay Chandler
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This edition of,nbsp;Eastworld,nbsp;was curated and produced by Grady McGregor. Reach him at,nbsp;[email protected]