How TikTok became America’s China compromise

The TikTok deal now taking shape reflects how concerns about data security and algorithmic control arising from Chinese ownership have transformed into a commercial opportunity, mediated by executive discretion. What began as a straightforward national security imperative — preventing China’s potential access to American user data and influence over content recommendations — evolved into a negotiated settlement that allows the Chinese parent company to retain both economic participation and, potentially, technical influence.

The 2024 divest-or-ban law granted the executive sweeping authority to determine what constitutes a “qualified divestiture”. The Supreme Court later upheld the statute’s constitutionality, leaving in place the executive’s broad discretion to determine what qualifies as an acceptable divestment.

That discretion became the mechanism through which President Trump reframed the issue. By September 2025, the administration declared victory: a joint venture structure that transferred majority ownership to American investors while preserving ByteDance’s minority stake and, according to the framework, licensing arrangements for the recommendation algorithm. The White House labelled this arrangement “The Art of the Deal”, positioning it as a win for American control, economic opportunity and Trump’s dealmaking prowess.

The structure reflects this commercial pivot. Oracle, Silver Lake and Abu Dhabi-backed MGX collectively hold 45% of the new US entity, valued at approximately US$14 billion. ByteDance retains just under 20% and chooses one seat on a seven-member board. The US joint venture assumes responsibility for data protection, algorithm security, content moderation and software assurance, with Oracle serving as the trusted security partner. The algorithm will be retrained on US user data and monitored domestically, though ByteDance appears to license the underlying technology — a distinction that preserves Chinese technical architecture while satisfying statutory requirements on paper.

Yet the emphasis on control obscures deeper ambiguities. The law required eliminating any “operational relationship” with ByteDance, explicitly including “cooperation with respect to the operation of a content recommendation algorithm”. Retraining a licensed algorithm under Oracle’s supervision may constitute technical independence, but it preserves dependency on ByteDance’s core intellectual property. ByteDance also retains management of e-commerce, advertising and marketing functions on the US platform, creating ongoing operational entanglement that sits uncomfortably alongside claims of clean separation.

The arrangement thus appears less like a resolution of the original security concern and more like a politically acceptable middle ground. Congress provided the mandate. The courts validated executive discretion. The administration used that latitude to broker a deal that avoids forcing a complete divestiture, which Beijing would resist as precedent-setting. Legally sufficient under the executive’s determination, the structure nonetheless signals a willingness to mediate rather than eliminate Chinese participation, prioritising deal completion over the clean break the statute’s plain language appeared to require.

Seen in isolation, TikTok might appear to be a special case. Most prior US actions against Chinese technology targeted infrastructure and upstream systems — telecom equipment, semiconductors and surveillance technologies from firms such as Huawei, ZTE and Hikvision — whose exclusion imposed far fewer visible costs on American consumers or businesses. TikTok’s 170 million US users and its integration into American commercial and cultural life made outright prohibition politically and economically costly in ways that banning Huawei’s 5G equipment was not.

But the TikTok deal is emblematic of broader shifts in US technology policy. It reflects a move from categorical exclusion toward managed access. Five years ago, the dominant instinct in the US was denial: keeping China out of sensitive technologies and platforms wherever possible. More recently, that approach has given way to conditional engagement shaped by economic and strategic tradeoffs.

The evolution is clearest in semiconductor policy. After moving aggressively in 2022 to deny China access to advanced chips and manufacturing equipment, the US has shown greater flexibility, including limited allowances for Nvidia to sell modified versions of high-end AI chips to Chinese customers under licensing arrangements. The logic shifted from absolute prohibition to controlled access in a way that preserves US leverage while protecting American firms’ market positions and supply chain relationships.

TikTok follows the same template. Rather than forcing a complete break, the arrangement allows ByteDance to retain minority ownership and licensing revenue while transferring operational control to US entities subject to federal oversight. Like the chip modifications that make advanced processors available to China under restrictions, the TikTok structure permits continued Chinese participation within boundaries meant to contain security risks. In both cases, economic interests — private equity returns in TikTok, semiconductor sales for Nvidia — shape the definition of acceptable risk.

The result is a hybrid approach that prioritises economic security alongside national security. Neither China nor the US achieves its maximal objective. China avoids the precedent of forced divestiture or outright exclusion, while accepting constraints on autonomy and governance. The US limits foreign adversary control without severing commercial ties or forfeiting revenue streams. What emerges is managed interdependence rather than decoupling, a framework that leaves both sides room to manoeuvre while avoiding irreversible breaks.

The broader shift in US technology policy carries implications beyond TikTok. Because the platform is unusually large and visible, it resists easy generalisation. Yet exceptional cases often set precedents. If regulators accept partial divestment and conditional oversight here, other Chinese firms will press for similar terms.

The template emerging from TikTok is not simply about technical governability, but about economic value capture. In practice, that means ownership structures that place veto points in American hands, compliance architectures that create auditable boundaries around data and algorithms, credible commitment mechanisms, and partners with reputational exposure and operational controls that regulators can verify.

But layered on top is a political economy requirement: American capital and revenue streams that make the arrangement defensible. The TikTok deal succeeded because it created opportunities — US$14 billion in equity value for US investors, licensing fees for Oracle, advertising revenue through American intermediaries. Security concerns created the leverage but commercial benefits determined the outcome.

For US-China relations, the significance lies in the retreat from decoupling rhetoric. Rather than forcing separation, recent arrangements embed constraints through ownership rules and governance mechanisms while preserving commercial participation on terms designed to favour the US. Whether oversight mechanisms actually constrain risk or simply create the appearance of control remains an open question.

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