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US-China tensions

TikTok's US woes bode ill for patch-up of the great decoupling

Trump holds firm on deadline as Beijing moves to restrict AI exports

The U.S. sale of TikTok will have to clear the large hurdle set by China's restrictions against export of certain AI and algorithms.   © Reuters

PALO ALTO, U.S. -- An American president who refuses to extend the deadline for the sale or banning of TikTok, and a China restricting exports of the artificial intelligence that helps make the short-video app popular: these are poor signs that the two sides will bridge their differences and keep the world from splitting into two technological camps.

ByteDance, TikTok's Beijing-based owner, has until midmonth to find a buyer or be banned from America. And U.S. President Donald Trump is not budging.

"I'm not extending deadlines, no," he said in Maryland on Thursday before departing for a campaign event in Michigan. "It's Sept. 15. There'll be no extension of the TikTok deadline."

"So we'll either close up TikTok in this country for security reasons, or it'll be sold," Trump said.

The clock formally started with an Aug. 6 executive order to bar as-yet-unspecified "transactions" with ByteDance after 45 days, which would be Sept. 20. The administration has separately ordered ByteDance to unload TikTok in the U.S. by Nov. 12, a deadline that can be extended by 30 days.

Meanwhile, Western media reported Friday that Chinese officials would rather TikTok close operations in the U.S. than see a sale, citing multiple unnamed sources, saying that Beijing does not want to be seen as giving in to pressure from Washington.

TikTok -- which boasts more than 100 million American users, it said in a lawsuit challenging the order -- is deemed a national security threat by the Trump administration. The app's data collection "threatens to allow the Chinese Communist Party access to Americans' personal and proprietary information -- potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage," the order said.

The order cites the International Emergency Economic Powers Act as a source of authority. The IEEPA, intended to shield military and economic interests from specific threats, was applied by previous presidential administrations in response to coups and terrorism.

Trump had already taken the unusual step of wielding the IEEPA against Chinese telecommunications equipment giant Huawei Technologies. That he would recycle the tactic indicates his strong determination to back TikTok into a corner.

But China announced Aug. 28 an expansion of its export control list. New entries include AI interactive interface technology and personalized information push service technology based on data analysis.

"It's an arrangement that can, in effect, target TikTok's AI and algorithms," said Ayumu Shinozaki, an attorney in Tokyo.

China is considered well-positioned to develop AI, including facial recognition, that employs advanced algorithms. The country can easily make use of personal data on its population, the world's largest. In applications for relevant patents, China pulled ahead of the U.S. in 2017 and has remained the global leader ever since.

As for TikTok, "the AI image-processing and recommendation functions are the source of its competitive advantage," an executive at a Japanese technology company said.

With the release of China's revised export control list, it appears that Beijing's approval will be needed for a sale of TikTok's U.S. business if the deal includes algorithms and AI.

"There is a logical case that can be made for a decision issued for the purpose of protecting a nation's own industry," said Kana Itabashi, an attorney in Tokyo who is an expert in international affairs, of China's approach.

The World Trade Organization also allows limits on exports if national security necessitates them. China's AI export ban stands a strong chance of being tolerated, meaning that a sale of TikTok's U.S. operations faces a high hurdle.

Trump is adamant about his Sept. 15 deadline. An idea has apparently been floated to revise the terms of the sale. Instead of bundling AI together with TikTok's U.S. user base and the brand, as originally anticipated, the deal could completely carve out the algorithms or have ByteDance continue to own some of them.

But this would make TikTok's U.S. business less competitive, possibly pushing down the sale price, now estimated at up to $30 billion. American companies investing in ByteDance could cry foul.

A consortium of Microsoft and Walmart is one potential buyer. Another is Oracle and investors it has partnered with. An app without AI would make a deal less appealing.

There is speculation that the acquisition talks will be cut short, possibly leading to a shutdown of TikTok's operations in the U.S. and sparking a strong backlash by its user base in the country.

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