Sino Strategies: China's Influence & its Implications for the U.S.

Summary

• The U.S. and China are nearing an agreement allowing TikTok to continue operating in the U.S. under a joint venture led by American companies.
• While the deal ensures TikTok’s availability to 170+ million U.S. users, national security concerns remain regarding foreign-owned companies operating on U.S. soil. 

TikTok U.S. Is Saved

Government leaders in the U.S. and China are closing in on an agreement that will allow TikTok to continue operating in the United States. The deal will likely involve CEO of Fox Corp Lachlan Murdoch, as well as tech moguls Larry Ellison and Michael Dell, as well as their companies. Moreover, the U.S. government will not have a stake in the TikTok joint venture. The companies involved in the deal will maintain full control of TikTok’s algorithm 

The deadline for a deal to save TikTok in the U.S. was extended after U.S. Treasury Secretary Scott Bessent met with Chinese Vice Premier He Lifeng and other senior PRC representatives in Madrid for discussions primarily focused on tariffs but including topics such as counternarcotics efforts and economic partnership. Presidents Trump and Xi Jinping made progress towards a deal over phone conversations in anticipation of a meeting between them in October. 

China’s U.S. Tech Security Challenge

The primary concern that senior U.S. government officials had over TikTok’s U.S. presence was the potential national security threat it posed. TikTok is used by over 170 million Americans, and many individuals rely on TikTok for entertainment and information sharing. Some U.S. businesses rely on TikTok for advertising. TikTok’s parent company, ByteDance, has formed strategic partnerships with PRC government entities, and there have been concerns that TikTok may be operating on behalf of the PRC to interfere in U.S. politics, that TikTok may be collecting data on U.S. citizens, and that individuals who download TikTok may be exposing themselves to Chinese-originating malware. 

These national security concerns are not unfounded, given the precedent of China’s tech company controversies, and the need to curtail TikTok’s business in the U.S. received bipartisan support. While the proposed solution to bring TikTok under the control of U.S. leaders will keep the app alive, it will likely not have much of an impact in reducing the national security concerns of Chinese companies operating in the U.S. Of course, that is not what this agreement was reached to accomplish. Nevertheless, as competition for tech dominance between the U.S. and China continues to ramp, especially in AI, national security and the rules of law and international order will likely become increasingly important. 

Implications for the U.S.

1. U.S. Policy Implications

For U.S. policymakers, the TikTok deal could be setting a precedent regarding foreign companies operating in the U.S. The deal could open the door for other Chinese companies, or businesses from other countries, to increase operational presence in the U.S. and even pursue joint ownership structures similar to TikTok’s. U.S. foreign policymakers may have to track such interest from their global counterparts. 

The TikTok deal also raises questions around the optimal strategy to address national security concerns without straining economic relationships. If U.S. investors had greater incentive or more pathways to pursue co-ownership of foreign corporate entities, then they might be able to contribute as sub-national actors, in coordination with policymakers, to defending national security by controlling foreign companies.  

2. U.S. Business Implications

For American companies, the TikTok agreement has the potential to increase market competition and supplier leverage, especially in the media space. With potential backing from other media and tech companies, TikTok may be able to capture a greater share of user engagement and advertiser revenue. 

3. U.S. Consumer Implications

The implication of this agreement for U.S. consumers is clear: TikTok will continue to be available. U.S. consumers should continue to be wary of corporate overreach, data or privacy breaches, and threats to national security from foreign actors. While the TikTok agreement should make the app safer and more secure for U.S. users, other Chinese companies operating in the U.S. may still present concerns for user security.