TikTok App on Phone

TikTok Deal Seen as a Positive Against Trump’s Trade War With China

In a move that saw President Donald Trump reportedly give his ‘blessing’, TikTok has struck up a potential deal that will allow the social media company to continue to operate within the United States.

Last month Trump had signed an executive order that meant TikTok’s owners ByteDance had only 90 days to sell their company, or risk being banned within America, something Trump constantly threatened to do due to security fears.

Officials believe that the Chinese government was taking the personal information from all users in America – estimated to be around 100 million – and using it for their own purposes.

The app would have had any new updates or downloads blocked by the US Commerce Department if a deal had not been struck.

The new owners are TikTok Global, a new company that is rumored to be based in Texas. The deal has come with some conditions though. In the first instance, the company is a partnership and not a divestment as first believed. An agreement has also been made that the company will prioritize Trump’s “America First” policy agenda.

The original owners ByteDance had valued the company at $60 billion, an amount that seemed to sit well with Walmart Inc and Oracle Corp, who have taken stakes in the company.

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According to recent reports, Walmart will be investing for a 7.5 per cent stake in the app while Oracle will receive 12.5 per cent. Between the two companies they would pay $12 billion but only if the $60 billion price tag was met. Oracle would also be responsible for complying with all requests regarding America’s national security storing the US user data.

However, as all parties involved in the partnership were still discussing the procedures for the data security alongside the equity structure, a final valuation was still to be confirmed.

When discussing the deal at a rally in North Carolina, Trump said, “I said, you know, do me a favor, could you put up $5 billion into a fund for education so we can educate people as to the real history of our country, not the fake history.”

The US commerce department had previously released a statement that said, “The Chinese Communist Party (CCP) has demonstrated the means and motives to use these apps to threaten the national security, foreign policy, and the economy of the US.”

While other investors – including Sequoia, Coatue and General Atlantic who along with Walmart and Oracle have agreed on an initiative that would provide a video curriculum which would include subjects such as science, computer engineering, math, reading and history – there was no confirmation on how much this project would cost.

Another aspect of the deal would mean that while ByteDance would be allowed to retain TikTok’s source code, Oracle would be allowed to conduct audits on the information.

CEO of Oracle Safra Catz confirmed they were “100 per cent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users.”

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According to a report by Reuters, a large proportion of the directors for TikTok Global are to be American and a security expert would be asked to sit on the board alongside a US chief executive. Walmart have since confirmed their CEO Doug McMillon will be one of the five new board members.

President Trump and his administration are continuing to remove any ‘untrusted’ Chinese apps from the country’s networks and has placed an order for WeChat downloads to be removed from app stores.

Trump has also worked to remove any company or nation he views as a threat to America’s national security, particularly those linked with China.

Long before the “China virus” arrived in the US, China and America had been subject to a trade war that had seen both countries impose tariffs on each other’s goods.

While Trump had issues with what he claimed was China’s unfair trading practices and, more recently, their intellectual property theft, China believed that America was trying to stifle their growth and therefore their position as one of the world’s fastest growing economic powers.

Trump’s “America First” policy has been seen as patriotic by many as he continues to encourage consumers to opt for American produced items before looking for imported goods, something he has boosted by raising imported goods tariffs so high the general public can no longer afford them.

At the start of the year tariffs imposed on Chinese produce had reached $360 billion, over three times as much as the tariffs China had imposed on America in an act of retaliation.

Both countries have denied the other’s claims but what is clear is that the actions from America and China have caused damage to the world’s economy. And with coronavirus causing untold damage to the economy for most of 2020 many experts are wondering if business can in fact recover.

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