Aug 7, 2020 - Economy & Business

There's little consensus on TikTok's specific national security threat

An illustration of tiktok logos that look like rorshack tests
Illustration: Aïda Amer/Axios

TikTok has become a Rorschach test for how U.S. politicians view China, with little consensus on the specifics of its threat to homeland security.

The big picture: Much of what D.C. fears about TikTok is fear itself, and that's reflected in President Trump's executive order to ban the app by Sept. 20 if it's not sold by parent company ByteDance — alongside another focused on Chinese messaging app WeChat and its parent company Tencent.

  • Trump trade adviser Peter Navarro told Axios Monday that he's worried about the Chinese government accessing passwords and location data, given laws that require data disclosure to the Chinese government upon request.
  • Some remain wary of possible "backdoors" into devices, after security flaws were discovered (and remedied) earlier this year.
  • Others believe the threat is more cultural, arguing that the Chinese government could use TikTok's algorithm to promote content that destabilizes U.S. politics or society.
  • The White House executive order reflects all of these concerns.

Between the lines: The executive orders were sloppily worded.

  • The TikTok executive order claimed there can be no "transactions" with the company after the 45-day deadline, even though it's nearly impossible to imagine that Microsoft or any other buyer could close a deal by then. A senior White House official later told me that there just must be a satisfactory deal in place, not completed.
  • TikTok this morning said the executive order "risks undermining global businesses' trust in the United States' commitment to the rule of law."
  • The WeChat executive order suggests that U.S. entities can't enter transactions with not only WeChat, but also with parent company Tencent. The same WH official was less clear when I asked for clarification on this one.
  • It matters because, if read literally, Tencent would need to divest its numerous investments in U.S. tech companies within the next 45 days, or else hold them forever. Companies like Reddit and Fortnite maker Epic Games. And, if it holds them, what happens if a kid buys something from Fortnite? Is that a violation?

The impact: Not too much, unless it angers the Chinese government to the point of nixing any TikTok sale.

  • Microsoft is now racing to getting an agreement done with ByteDance — having chosen to first focus on CFIUS and other U.S. politics. It takes Trump's deadline seriously.
  • However, some big issues remain outstanding, including pricing and what TikTok geographies it plans to buy, per a source close to the process.

Yes, but: Other U.S. tech companies operating in China must be nervous this morning about retribution. Plus, many of them use WeChat to market to Chinese consumers.

The bottom line: The U.S.-China trade war is escalating, with social apps substituted for soybeans.

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