TikTok Agreement 'Positive but Unresolved' — Final Decision Deferred to APEC
U.S. President Trump and Chinese President Xi Jinping held a phone call on September 19 (U.S. Eastern Time), leading to market speculation that negotiations regarding the handling of TikTok's U.S. operations have progressed. However, the Chinese side's official explanation remains cautious, merely repeating their traditional stance of 'respecting the will of companies and welcoming negotiations based on market principles and legal compliance.' In short, the current situation is one where the atmosphere of an 'imminent agreement' and the reality of 'still having a long way to go' coexist.
1. What happened: Between 'imminent agreement' and 'undecided'
1-1. Discrepancy in official tones from both sides
President Trump described the call as 'productive' and announced that they had agreed to meet in person at the APEC summit in Gyeongju, South Korea, between late October and early November. On the other hand, the Chinese side's readout of the call did not go as far as explicitly 'approving' TikTok by name, limiting itself to expressions that encourage the continuation of business negotiations. Here lies the gap between the 'positive atmosphere' and the 'cautious official wording'.
1-2. Outline of the proposed framework (based on reports)
It has been reported that a consortium consisting of Oracle, Silver Lake, and Andreessen Horowitz (a16z) may acquire and operate TikTok's U.S. business, with the algorithm potentially being licensed from ByteDance. However, issues concerning national security, such as the authority to govern user data and substantive control over the algorithm, remain unresolved.
2. Legal regulations and timeline: Does 'complete separation' meet the requirements?
2-1. PAFACA Act and deadline extension
The PAFACA Act enacted in 2024 strictly limits the provision of apps controlled by foreign adversaries within the United States. TikTok has been forced to choose between a complete transfer of control (divestiture) or a cessation of operations in the U.S. While the Trump administration has extended the sale deadline to December 16, whether partial ownership or a 'licensing model' satisfies the intent of the law remains the biggest point of contention.
2-2. Views of Congress and authorities
Strong vigilance remains among bipartisan lawmakers and conservative pundits, who argue that 'a compromise that leaves Chinese influence intact is insufficient.' Voices advocating for complete separation are mixed with those emphasizing the construction of practical data governance and audit systems. Clarification of legal compliance (ownership structure, code access, and operational audit authority) is essential.
3. Technical hurdles of the deal: Algorithms, data, and operations
3-1. Ownership of the algorithm and the 'black box'
The core of TikTok's competitive advantage is its recommendation algorithm. The focus is on how much access ByteDance will disclose and transfer to the U.S. side regarding source code, trained models, and ML pipelines. There are concerns that 'licensing' alone will be insufficient for update authority, model retraining, and audit access to logs.
3-2. Data sovereignty and audit systems
Data residency within the U.S., third-party audits, and the guarantee of verifiability by the government are required. While a plan for Oracle to become the core protector of U.S. user data has been reported, the question of who holds the actual power to operate the app will likely determine how investors and regulators evaluate the deal.
4. Geopolitical extensions: Semiconductors, export controls, and APEC
4-1. Export controls and the NVIDIA issue
This call and the speculation surrounding an agreement are also linked to expectations for the easing of export controls on AI semiconductors. NVIDIA CEO Jensen Huang has repeatedly expressed frustration over the economic impact of export restrictions to China and the loss of market opportunities. With reports of continued efforts by the Chinese side to curb purchases and develop alternative chips throughout the year, the tug-of-war between supply and demand continues.
4-2. 'Political schedule' at APEC
The two leaders are scheduled to meet at the APEC Gyeongju Summit in South Korea from October 31 to November 1. There is a growing consensus that the TikTok issue will likely be handled as part of a larger package (involving tariffs, critical minerals, export controls, and secondary sanctions related to Ukraine and Russia). It is appropriate to view the phone call not as a final agreement, but as a stepping stone for the next political agenda.
Summary
The current consensus is 'positive but unresolved'. While the official Chinese wording remains limited to 'inter-company negotiations within the framework of market principles and legal compliance,' the U.S. side is aiming for a 'political landing' by APEC. The final solution depends on how the three points of ownership structure (control), algorithmic authority, and data auditing are designed at the intersection of law and politics. Whether the practical details can truly be finalized before the 'photo finish' in Gyeongju at the end of October is the greatest concern for the market and the business.