Trump's ban on TikTok is another move in the 'tug-of-war' between the US and China that may send the Oracle deal back to the drawing board, experts say

Reuters
  • The US Commerce Department said on Friday that it would prohibit downloads of TikTok and WeChat beginning September 20.
  • The move comes after Oracle and TikTok announced a proposal for the enterprise tech giant to become TikTok’s “trusted technology provider” in the US.
  • But experts say the move to ban TikTok suggests that the involved parties are not happy with the deal.
  • That could send the deal back to the drawing board, some experts say.
  • Trump is said to have been pushing for US ownership, and the Oracle deal would have left ByteDance as the majority stakeholder.
  • Visit Business Insider’s homepage for more stories.

After weeks of uncertainty, the Trump administration is upholding its decision to take action against TikTok and WeChat, two of the world’s most widely-used social networks that are both owned by Chinese tech companies.

The US Commerce Department announced on Friday that it would prohibit TikTok and WeChat from being offered in US app stores beginning Sunday, September 20. The move comes after Oracle emerged as the “trusted technology provider” for TikTok’s US presence, a proposal that TikTok said it believed “would resolve the administration’s security concerns.”

But the decision to prohibit the app from being downloaded in the United States is a sign that at least some of the parties involved aren’t satisfied with the terms of the Oracle deal — whether it be the US government, TikTok’s parent company ByteDance, or the Chinese government, experts say.

“I think what it means is they may have to bring their pencils back to the deal table and offer some potential concessions,” Theresa Payton, former White House chief information officer and CEO of cybersecurity consultancy firm Fortalice Solutions, said to Business Insider.

Experts also say it could be indicative of broader tensions that have been building between the United States and China, particularly over how technology companies are allowed to operate in their respective countries.

Uncertainties about the Oracle partnership

The US Commerce Department set two deadlines for TikTok. As of September 20, companies in the US are barred from distributing or maintaining the TikTok app. TikTok rose to the top of Apple’s App Store on Friday, two days before the ban goes into effect.

TikTok has until November 12 to address the Trump administration’s security concerns or else the app will stop working within the US.

Oracle recently emerged as the unexpected winner in the race to work with TikTok on its US operations in an attempt to assuage the national security concerns surrounding the app. Both Oracle and TikTok said on September 14 that they have submitted a proposal that would name Oracle as its “trusted technology provider” in the United States.

But little is known about what such a partnership would entail, other than that ByteDance has committed to establishing TikTok as a US-headquartered global company and would create 20,000 jobs under the proposed deal. As part of the partnership, Oracle would also be able to review TikTok’s code to ensure there are no potential backdoors, the Wall Street Journal reported.

Still, ByteDance would remain the majority shareholder, leaving Oracle as a minority stakeholder, reports the Journal. Trump is said to have been pushing for majority ownership from a US company, the Journal also reported.

“My concern about the Oracle deal was that even under the best of circumstances — a code review, looking for backdoors that could be the potential place where information could be accessed — in the best of times is very hard to do,” Payton said. “Every time you make a change to that code and recompile, you have to evaluate the code all over again.”

The ban could suggest that TikTok and Oracle may need to “go back to the drawing board” and reevaluate the terms to satisfy Trump’s security concerns, according to Daniel Elman, an analyst at Nucleus Research.

“Clearly there have been some stumbles in getting the Oracle deal approved,” Wedbush Securities analyst Dan Ives also said. “This puts further pressure on ByteDance and TikTok to agree to the issues proposed otherwise this plug gets pulled.”

The ‘tug-of-war’ between the US and China

By enforcing the ban, Trump could be sending a message to the Chinese government urging it to allow for a deal that would adequately satisfy concerns by allowing for more US control. It could also be somewhat of a retaliation against China’s own policies, which prohibit American tech giants like Google and Facebook from operating within the country.

“It’s more about sending a signal,” Ray Wang, principal analyst and founder of Constellation Research, said to Business Insider. “We told you there was a deadline, now we’re shutting it down until you figure it out . . . It’s a tacit acknowledgment that the US can’t just make this decision.”

China also updated its list of technologies that are barred from being exported in late August to include tech that’s believed to be critical to TikTok’s recommendation engine. The change occurred just weeks before the Oracle deal was announced, throwing a wrench in negotiations and possibly giving Beijing a stronger say in TikTok’s fate.

“I think China and the US are going back and forth over it,” Elman said. “It seems like a little bit of tug-of-war with TikTok in the middle.”

Regardless, the ban suggests that concerns around TikTok are far from being solved, according to Rebecca Wettemann, an analyst with research firm Valoir.

“China’s making the US out to be the bully on this, and while the ban is surely intended to push China toward a deal, it’s equally likely China will dig in,” Wettemann said to Business Insider via email. “The security concerns are legitimate, but unless the US does a better job of communicating the risk and why it’s important, it’s just throwing its weight around.”

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