How the TikTok Law Could Intensify the US-China Tech Spat

"(Bloomberg Businessweek) -- Gianna Christine began her career as a social media influencer four years ago, after the professor in her college digital media class assigned students to post every day on the video streaming service TikTok. Since then, she’s built an audience of 2.7 million fans on the app and earned a six-figure annual income, talking into her iPhone about everything from awkward encounters with neighbors in her New York City apartment building to the best post-clubbing late-night snacks..Recently, though, Christine, like other TikTok stars, started to post more frequently on other services such as Instagram, Snapchat and YouTube. These efforts started in 2020, when then-President Donald Trump raised the prospect of banning TikTok, and intensified during the past few weeks as Congress suddenly advanced a bill that would remove TikTok from US app stores within nine months unless its Chinese parent sells it to an American company. The punishment would effectively kill the app by preventing distribution and even routine software updates. Christine, like many of her fellow TikTok users, views the law as the beginning of the end of TikTok in the US. “People are angry about it. We love the community,” she says. “But there’s acceptance, too. I don’t want to lose my income if it gets taken down.”.A ban of the immensely popular app has for years seemed like a long shot to overcome the effective lobbying and congressional dysfunction that have stifled nearly every other attempt to impose stricter regulations on tech companies. Then, improbably, the forces that govern the process of legislating in Washington suddenly aligned, and the provision was approved as part of an emergency bill authorizing tens of billions of dollars in aid to Ukraine, Israel and Taiwan. On April 24, President Joe Biden signed it..This set up an inevitable legal challenge, probably on First Amendment grounds. “Make no mistake, this is a ban, a ban on you and your voice,” Shou Chew, the Singapore-based chief executive officer of TikTok, said in a video on the app the day the bill was signed. “Politicians may say otherwise, but don’t get confused. Many who signed the bill say the TikTok ban is the ultimate goal.” It also raised the chances that China will retaliate against a US company or industry. This spat over an app best known for silly dancing videos could be a pivotal moment in an escalating rivalry between the world’s two superpowers..TikTok has about 170 million users in the US, and they spend significantly more time on it than people do on Instagram or Snapchat, according to app monitoring firm SensorTower. A Chinese company operating a giant consumer internet service in the West had always suggested an uncomfortable double standard. US-owned apps such as Facebook, Google, Instagram, Signal and WhatsApp aren’t allowed in China. The disparity was largely ignored until the countries started enacting tariffs on each other’s products during the Trump administration and a fierce economic rivalry burst into the open. The US limited the use of Chinese telecom equipment in 5G networks. A few years later it restricted advanced computing chips that might go into military and artificial intelligence systems..More recently, Chinese government agencies and state-backed companies asked staff to not bring foreign devices such as the iPhone into the office, heightening tensions and making the TikTok double standard even harder to overlook. “They have already gone after our companies,” said Raja Krishnamoorthi of Illinois, the ranking Democrat on the House China committee and one of the authors of the TikTok bill, on Bloomberg TV’s on April 25. “They want to be able to operate here freely, unfettered, but they don’t allow our companies to do the same in China.”.US officials have long expressed concern that TikTok could serve as a way for the Chinese government to collect data on US users and spread propaganda. Since 2020, both the Trump and Biden administrations have rejected as inadequate security measures that the company said would protect US user data, but momentum for a ban seemed stalled earlier this year. The Justice Department was still working with a small bipartisan group of lawmakers and aides to write a law that would survive judicial scrutiny and establish a drastic consequence—a ban in the US—should parent ByteDance Ltd. once again reject the government’s demand to sell TikTok..In a flurry of classified briefings between that bill’s introduction in March and its inclusion in the foreign aid package, senior officials from the FBI and other federal agencies warned that the app is subject to Chinese national security laws that require turning over data and algorithms to the government in Beijing. They raised the possibility that the app could influence American politics. The bill passed the House with overwhelming support, but it appeared to languish in the Senate. The roadshow may have helped persuade skeptics like Senate Commerce Committee Chair Maria Cantwell, a Democrat from Washington, who was still cool to the idea but ultimately voted for it after securing minor changes..Read more: What a TikTok Ban in the US Would Mean for the App.The proliferation of pro-Hamas videos on the app after the Oct. 7 attacks on Israel also swayed some lawmakers, as did a series of alerts TikTok sent in March, urging its adult users to contact their representatives to express opposition to the bill. The alerts triggered plenty of angry phone calls to Capitol Hill offices, but the maneuver may have backfired on TikTok by proving that the app could in fact manipulate the behavior of Americans, according to Representative Mike Gallagher, the Wisconsin Republican who until recently chaired the House China committee..With no organized resistance from US tech companies, which could benefit from the elimination of a robust competitor, the TikTok provision was a last-minute addition to the foreign aid bill, the culmination of what one aide describes as the “thunder run,” a military term for sending a line of tanks into enemy lines with no warning. Combining the bills effectively forced the hand of skeptical senators, many of whom felt they couldn’t risk jeopardizing much-needed aid to Ukraine..Another potential obstacle for GOP backers of the provision was former President Trump, who’s reversed course on TikTok and said in March that he opposed a ban. But several Republicans called and talked him down, reminding him that it was his administration that first tried to force a divestiture and arguing that this law would burnish his legacy. In the end, Trump’s criticism was soft enough that it didn’t have a material impact on the vote, the aide says..Now what once seemed like an impossibility initiated by a handful of China hawks marches toward a congressionally imposed deadline. ByteDance could sell the app to a US company or investors, but Nazak Nikakhtar, a former Commerce Department assistant secretary when Trump tried to force ByteDance to sell TikTok, says it didn’t happen then and is unlikely to happen now. “All these people are going to come in and say, ‘I’ll buy it.’ Well, China’s not going to give you all the code,” Nikakhtar says..ByteDance figures Beijing officials would oppose the sale of TikTok’s prized source code and recommendation algorithms, according to two people familiar with its thinking, who asked not to be named talking about politically sensitive matters. Executives are instead mapping out legal strategies and betting they can get an injunction to avoid an immediate shutdown, according to one of the people. They’re also discussing less palatable scenarios to try to sell TikTok’s US business without the underlying technology, though that makes it far less valuable and is unlikely to appeal to buyers..The still hypothetical legal dispute, , would almost certainly head to the Supreme Court, which would have to weigh the government’s security concerns against the free speech and “expressive interests” of both its users and the app’s corporate owner. The government would have some precedent on its side: The US has long restricted foreign ownership of media companies, radio stations and telephone networks. “If the question is ‘will this thing hold up in court?’ I think it’s more likely than not that it will,” says Alan Rozenshtein, a law professor at the University of Minnesota and former adviser to the Justice Department on cybersecurity and foreign intelligence..It’s all but certain that China will retaliate against the US, say China watchers. The country could restrict US access to critical minerals or other key components of the tech supply chain. It also could go after companies such as Apple, Microsoft or Tesla, which have significant manufacturing facilities in the country and sell to Chinese companies and consumers. Apple Inc.’s dependence on China, where it gets one-fifth of its sales, makes it particularly vulnerable, though its contributions to the Chinese economy could protect it from reprisal. “Is it going to cause some real pain? Absolutely,” says Nikakhtar. “But do we take the pain now, when it’s relatively manageable, or do we take the pain later, when too much is gone?”.For Alyssa McKay, a TikTok influencer with 10.4 million followers, the pain takes the form of sadness that a formative part of her life may soon go away. “Collectively, Gen Z, we all just gravitated to it, especially during the pandemic. It was the one thing everyone was doing all the time,” she says wistfully. “I would grieve the loss of TikTok. It was such a huge part of my life and my friends’ lives.” —.More stories like this are available on bloomberg.com.©2024 Bloomberg L.P."

How the TikTok Law Could Intensify the US-China Tech Spat

The law is almost certain to lead to a Supreme Court case and retaliation against US interests in China.

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How the TikTok Law Could Intensify the US-China Tech Spat

The law is almost certain to lead to a Supreme Court case and retaliation against US interests in China.

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