Deal for U.S.-Owned TikTok May Keep Chinese Algorithm: What to Know

An impending ban on TikTok was averted Monday after officials from both countries reached a “framework” of a deal that would allow the popular social media app to continue operating in the U.S. Trump, speaking to reporters Tuesday, said that the U.S. “reached a deal” with China during talks in Spain to divest TikTok’s U.S. operation from its Chinese ownership and that he will finalize the deal with his Chinese counterpart Xi Jinping on Friday during major trade negotiations between the countries. Trump extended the deadline—for a fourth time—to Dec. 16 for ByteDance to divest its U.S. app to a U.S. owner. But TikTok’s algorithm, the secret sauce behind its addictiveness and commercial success but also a major point of contention in national security concerns, may remain that of its Chinese parent company. Wang Jingtao, deputy director of the Cyberspace Administration of China, said in a press conference in Madrid on Monday that U.S. and Chinese officials reached an agreement that included “licensing the algorithm and other intellectual property rights.”   “The Chinese government will, according to law, examine and approve relevant matters involving TikTok, such as the export of technology as well as the licensing of intellectual property,” Wang said, adding that Washington and Beijing agreed that Bytedance would entrust a partner with TikTok U.S.’s user data and content security. U.S. lawmakers have previously claimed that TikTok’s algorithm could be used by China to manipulate what content is most visible to Americans and thus influence public opinion. While Washington had pushed for it to be under U.S. control, Beijing claims export laws in 2020 give the Chinese government approval rights over any export of algorithms. How much control over the algorithm China will get to keep under the future arrangement remains unclear, but an Asia-based investor of ByteDance told the Financial Times that the new American TikTok firm would use part of the Chinese algorithm, though it would train it in the U.S. “Beijing’s bottom line is a licensing deal,” the investor said.  The Wall Street Journal, meanwhile, reported that TikTok’s engineers will recreate the content-recommendation algorithms for a new app that current U.S. users will be asked to switch to, citing unnamed sources. A senior White House official told the media that “any details of the TikTok framework are pure speculation unless they are announced by this Administration.” Who’s reportedly buying TikTok? While both U.S. and Chinese officials have largely kept mum about the deal’s finer details, U.S. Treasury Secretary Scott Bessent, who attended the Madrid meeting, said that it follows a framework “for a switch to a U.S.-controlled ownership.” Trump, before leaving for the U.K. on Tuesday, told reporters, “We have a group of very big companies that want to buy it,” but he held off on naming the companies. But the Journal named three companies making up the investor consortium that will operate TikTok in the U.S. on Tuesday—Oracle Corp., venture capital firm Andreessen Horowitz, and private equity firm Silver Lake Management LLC—citing unnamed people familiar with the matter. The deal would reportedly reduce ByteDance’s stake in the U.S. TikTok firm to under 20% to satisfy a 2024 law that calls for TikTok to be banned in the U.S. unless ByteDance sells its assets to a U.S. firm. The Journal also reported that existing non-Chinese investors in ByteDance, including Susquehanna International, KKR and General Atlantic, would be part of the non-Chinese 80% of the new firm. Oracle, an Austin-based company founded by Trump ally Larry Ellison, has worked with TikTok in the U.S. since 2020 to host user data in the U.S. and in other countries and will reportedly continue to provide cloud services for TikTok in the U.S. under the deal. The new U.S. TikTok company, the Journal reported, will also have an American-dominated board with one member designated by the U.S. government. Addressing national security concerns U.S. trade officials did not give specifics on how TikTok’s algorithm will be handled, but Bessent told Reuters Monday that the terms of the deal with China will preserve the “Chinese characteristics” of the app but that the U.S. is “quite comfortable with the national security aspects of the agreement.” Bessent said Monday that Beijing made “aggressive asks” on the TikTok investment deal that Washington didn’t want to “sacrifice” national security for. Trade Representative Jamieson Greer also addressed concerns about data sharing with China. Speaking to Fox Business Tuesday, Greer said, “There is a deal out there between the private parties who are making the transaction, and it does account for this specific issue on U.S. user data, so it doesn’t go back to Beijing.”  Still, U.S. lawmakers raised concerns about the algorithm. The House Select Committee on the Chinese Communist Party said that any deal between Beijing and Washington must comply with the law requiring TikTok to be divested from its Chinese ownership. “It wouldn’t be in compliance if the algorithm is Chinese,” a committee spokesperson told the Associated Press. “There can’t be any shared algorithm with ByteDance.” James Palmer, Foreign Policy’s deputy editor, wrote Tuesday, “China would get the best of both worlds: effectively complying with the law while keeping control over the content that U.S. users consume.” Ultimately, the law allows the President to determine whether or not ByteDance has fully divested from TikTok.A U.S. adviser close to the deal told the Financial Times: “It’s the ultimate Taco trade”—referring to the acronym Trump Always Chickens Out. “After all this, China keeps the algorithm.”