Why China may finally be giving up TikTok
When the news broke last week that TikTok had agreed to sell its American operations, and seeing the former President’s enthusiastic reaction, my initial thought was that this represented a significant victory for the United States and a major concession from China. After all, Beijing had staunchly resisted such demands for five years, frequently condemning U.S. calls for divestment as discriminatory.
However, a conversation with my colleague Lily Kuo offered a crucial alternative perspective. She helped me understand that if this indeed marked a concession from China, it was one made from a position of surprising strength. TikTok, she explained, has evolved into a relatively minor bargaining chip in a much larger and more complex negotiation.
Should China proceed with divesting TikTok (the exact terms are still being finalized), it appears to be creating strategic space for negotiations on issues it considers far more vital: trade tariffs, advanced technology, and the status of Taiwan.
You can refer to our discussion on this topic.
During his first term, the former President was a vocal advocate for banning TikTok in the U.S., sharing widespread concerns that China could use the platform for espionage and spreading misinformation. Forcing a sale or banning the popular video app was viewed as essential for national security.
Yet, China consistently refused to grant American investors control over the platform and its powerful recommendation algorithm. This led to the U.S. Congress passing a law in early 2024, mandating that ByteDance, TikTok’s Chinese parent company, sell the app by a specific deadline or face a ban.
Then came an unexpected turn: the former President publicly opposed Congress’s initiative.
At that time, he was deep into his re-election campaign. TikTok was proving valuable for reaching younger voters, and one of his prominent financial supporters, a Wall Street financier, was a significant investor in ByteDance.
Since returning to office this year, the former President has repeatedly used executive orders to extend TikTok’s sale deadline. Concurrently, he has intensified a trade war with China, imposing extensive tariffs on Chinese imports. In response, China has reciprocated with its own tariffs and has leveraged its control over critical minerals to maximize economic pressure on the U.S.
However, recent months have seen the two global powers engaged in negotiations, seemingly identifying areas of mutual interest. In Beijing’s strategic assessment, now is the opportune moment to play the TikTok card, believing it holds maximum leverage.
“It looks like weakness,” Lily observed, “but it’s actually a tactical move to focus [the former President] on the things that China cares most about.”
This arrangement offers the former President a perceived victory on an issue he championed – preserving the app he credits with aiding his re-election – while China aims to foster a constructive environment for discussions on its priorities. China seeks relief from tariffs. It wants Trump to loosen export controls on advanced chips and to cut back support of Taiwan. It also wants an in-person meeting between the former President and President Xi Jinping, ideally in China, to carefully manage public perception.
Such a meeting is now highly probable, according to Lily. And concessions on some, or even all, of China’s other key demands no longer seem out of reach.
If the plan unfolds as anticipated, American entities will control TikTok moving forward. The former President indicated yesterday that a major media corporation could be among the involved investors. This may, in part, alleviate a potential national security concern, though some observers remain wary that the deal’s specifics might not go far enough.
The critical question now is whether these gains will come at the cost of concessions on advanced AI technology, or potentially even on Taiwan – issues generally considered more vital to U.S. national security than a social media application.
“The Chinese side is fairly optimistic because they see [the former President] as transactional,” Lily noted. “He appreciates a good deal.”
Recognition of Palestinian statehood
Britain, Canada, and Australia announced yesterday their formal recognition of Palestinian statehood. These declarations intensify pressure on Israel and highlight a divergence between three major U.S. allies and the current U.S. administration.
While this coordinated action is expected to deepen the diplomatic isolation of Israeli Prime Minister Benjamin Netanyahu, it is unlikely to immediately alter the on-the-ground situation.
At the U.N. today, France plans to rally approximately 140 other nations to recognize Palestinian statehood as part of a two-state solution following the conclusion of the conflict in Gaza. However, this plan lacks a crucial component: any indication of support from Israel or the U.S. Understanding Palestinian statehood involves delving into its historical context and international implications.
ASK A CORRESPONDENT
Your questions about tariffs, answered
This week, we welcome Ana Swanson, a reporter covering trade and international economics in Washington, to our newsletter to address your questions about tariffs. We extend our gratitude to all readers who submitted insightful questions.
What effects are the tariffs having on the prices of goods in the U.S. now? Does the public see tariffs as a stealth tax, or are people content with this as a means of funding government spending? — Adam Tattersley, Britain
Ana: While it took several months, the impact of increased tariffs is now starting to be felt in consumer prices. Government data indicates that prices for goods significantly affected by tariffs, such as home furnishings, toys, and apparel, are rising more rapidly than other products.
Companies have been cautious in raising prices, partly due to concerns about economic weakness and consumer willingness to buy. They also pre-emptively stockpiled products before the tariffs were implemented. Nevertheless, economists warn that businesses cannot indefinitely absorb the costs associated with tariffs.
Public opinion on tariffs often aligns with political affiliations, with Republicans generally viewing them more favorably. However, even some who supported the former President express skepticism. Polling in April revealed that nearly 90 percent of surveyed Americans believed tariffs would lead to higher prices, while an August poll showed that 61 percent of Americans disapproved of them.
Interested in providing feedback on this newsletter? Please share your thoughts.
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That’s it for today. See you tomorrow. — Katrin
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