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China tech

Trump's push for cut of TikTok sale met with doubt and dismay

Blurring of lines between politics and business raises alarm

It is unclear how U.S. President Donald Trump expects to receive a cut of TikTok's sale.   © Reuters

WASHINGTON -- U.S. President Donald Trump's demand that the government receive a slice of TikTok's sale has left experts scratching their heads as to how such payment can be made legally and what kind of precedent it would set. 

Commenting on a proposed acquisition of TikTok's U.S. operations by Microsoft, Trump said Monday that "a very substantial portion" of any TikTok sale must go to the U.S. Treasury "because we're making it possible for this deal to happen."

The president has ordered ByteDance, the Chinese operator of the video-sharing app, to sell its American operations by Sept. 15 or be banned in the U.S. ByteDance is now in negotiations with Microsoft to sell the app.

Trump amped up the pressure Thursday, signing an executive order banning any transactions between TikTok and WeChat, and American individuals and companies following a 45-day grace period. 

Federal regulators have warned that the video-sharing app could be sending personal information of its roughly 100 million American users to Chinese authorities.

ByteDance has responded that the order "risks undermining global businesses' trust in the United States' commitment to the rule of law," and once again denied claims it was funneling information to the Chinese government.

Trump's demand for a percentage of the sale has mystified Washington insiders as to how the government could collect a fee on the sale.

"The only option I can think of is taxes," said a U.S. Treasury source. Even then, the tax treaty between the U.S. and China means Beijing, not Washington, would receive any taxes on the deal as a general rule.

"The US has no authority to demand or receive this kind of payment," said James Lewis, director of the Technology Policy Program at the Washington-based Center for Strategic and International Studies. "Microsoft can't make an ex gratia payment to Treasury, and if it went to a campaign or personal account it would be illegal. I think he does these tweets just to stir things up and then enjoy the ruckus."

ByteDance acquired American video app Musical.ly, which later became TikTok, in 2017, for about $1 billion. The app has since taken off in the U.S., and ongoing negotiations between ByteDance and Microsoft reportedly places its price in the neighborhood of $30 billion. Trump is reluctant to have such a large sum of money make its way to China.

But there appears to be no legal justification for the government receiving a cut. ByteDance will need to pay a filing fee of up to $300,000 to the Committee on Foreign Investment in the U.S., the U.S. regulator that has raised concerns about the app. But that fee hardly qualifies as a "big percentage" of the sale. And while Trump has the authority to seize foreign-owned assets, this is only an option to combat terrorism and would most likely not apply to ByteDance.

He could fine ByteDance if the company is found to be violating regulations, but a fine that coincides with the TikTok sale could be seen as an abuse of power.

Even White House officials were caught off guard as to how the government would be able to collect a fee on the transaction

"There's no specific blueprint here," White House adviser Larry Kudlow told U.S. media on Tuesday. "Not sure it's a specific concept that will be followed through."

Trump himself has not provided any details either.

Trump's demand for Washington to get a cut of the deal could undermine his push for TikTok's sale as well. 

The U.S., Europe and Japan are concerned by China's grip over it tech sector, including laws that require companies to turn over information on their customers. Authorities and companies in Japan and Europe accept demands for TikTok's sale as a precaution against such concerns, but would not support Trump himself intervening in the TikTok-Microsoft deal.

Trump's comments have also energized China. Beijing had not pushed back too hard on pressures against TikTok, given that it also restricts access to Facebook and other U.S. services on the mainland. But soon after Trump demanded a cut of the sale, Hu Xijin, editor-in-chief of the Communist Party-run Global Times, slammed the move as "an open robbery."

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