Beijing’s Retaliation on TikTok Could Hurt U.S. Firms

Beijing’s Retaliation on TikTok Could Hurt U.S. Firms

  • A forced sale may create another hurdle for U.S. companies operating in China.

On July 31, President Donald Trump told reporters that he planned to ban TikTok in the United States, sending shockwaves through the technology sector. After a false start over the weekend, Microsoft began negotiations with TikTok’s parent company, ByteDance, to purchase the app. The Committee on Foreign Investment in the United States has reportedly given TikTok 45 days to find a buyer or face a ban of questionable effectiveness from the U.S. market. The Trump administration has forced Chinese companies to reverse purchases of U.S. companies in the past—most recently the gay dating app Grindr—but this would mark the first time the U.S. government forced a Chinese-developed product with significant market share out of the U.S. market.

The Chinese government might retaliate to either a U.S. government outright ban or a forced sale of TikTok, but the long-term implications of a forced sale are potentially more worrying. Although ByteDance is not a state-owned enterprise or even a favored nominally private champion like Huawei, it is a major Chinese technology company with vast domestic and global markets. Some investors are valuing TikTok at $50 billion, about one-half of the valuation that ByteDance received in May. On July 30 and Aug. 3, China’s Ministry of Foreign Affairs (MFA) registered its objections to the U.S. government’s action against TikTok, noting the United States “is threatening a Chinese company based on presumption of guilt … in violation of the [World Trade Organization] principles of openness, transparency, and nondiscrimination.” China has a fairly consistent policy of measured but reciprocal retaliation to U.S. actions, such as shuttering the Chengdu consulate in retaliation for the abrupt closure of its consulate in Houston, and it has maintained this proportionality following U.S. actions such as cutting media visas and sanctioning officials.