Questions and potential hurdles surround a framework agreement announced on Monday between the U.S. and China that would switch short-video app TikTok to U.S.-controlled ownership, including whether any deal will comply with a 2024 law.
U.S. and Chinese officials announced the deal in principle in Madrid following trade talks, but did not give details or answer key questions such as whether China will agree to transfer ownership of the algorithm that makes the app so popular with 170 million Americans.
WHAT HAPPENS TO THE ALGORITHM?
During previous negotiations, Chinese authorities expressed strong reluctance to allow the export of TikTok’s recommendation algorithm, widely seen as owner ByteDance’s most valuable asset and a key driver of the app's global popularity.
In 2020, when the Trump administration first pushed for a sale of TikTok’s U.S. business, China updated its export control rules to cover technologies such as recommendation algorithms, effectively giving the government a say over any transfer.
WILL CONGRESS NEED TO APPROVE THE DEAL?
Any agreement could require approval by the Republican-controlled Congress, which passed a law in 2024 requiring ByteDance to divest TikTok or face a ban in the U.S., due to fears TikTok's U.S. user data could be accessed by the Chinese government and allow Beijing to spy on Americans or conduct influence operations through the app.
Since that law came into effect, U.S. President Donald Trump has extended the deadline for its enforcement three times.
Some Democratic lawmakers argued Trump had no legal authority to extend the deadline and suggested a previous deal under consideration in April would not meet legal requirements.
Attorney General Pam Bondi sent letters to Apple (AAPL.O) Google (GOOGL.O) and other companies in February that provide services or host TikTok, telling them the Justice Department was relinquishing any claims for potential violations of the law. They were made public in June.
A congressional aide told Reuters on Monday that lawmakers plan to scrutinize the latest deal when it is made public to see if it complies with the law.
WILL CHINA RETAIN ANY OWNERSHIP?
One issue is whether ByteDance will be fully divested from TikTok U.S. after the deal.
Trump responded to a question in an Oval Office press conference on whether China will have stake in TikTok: "We haven't decided that, but it looks to me and I'm speaking to President Xi on Friday for confirmation."
Senate Intelligence Committee chair Tom Cotton in April said American investors who wanted to buy TikTok must cut all ties with China.
ByteDance's current shareholders include American firms Susquehanna International Group, General Atlantic, KKR and Andreessen Horowitz.
If Congress rejects the latest agreement, Trump may have limited recourse. In January, the Supreme Court unanimously ruled the law, passed by an overwhelming bipartisan majority in Congress last year and signed by former Democratic President Joe Biden, did not violate the U.S. Constitution's First Amendment protection against government abridgment of free speech.
WHO WILL CONTROL TIKTOK AFTER DIVESTITURE?
Officials expect the final deal to be very similar to what was anticipated under the previous deal outlined in April, which would spin off TikTok's U.S. operations into a new U.S.-based firm, majority-owned and operated by U.S. investors. This stalled after China indicated it would withhold its approval following Trump's announcements of steep tariffs on Chinese goods. The precise structure of the new expected ownership remains unclear.
