TikTok Reaches Deal to Maintain U.S. Service. Or Does It?

Did you know that Phil the Groundhog is accurate only 39% of the time? Or that they used to eat the groundhog on Groundhog Day, back in the day? Tastes like a cross between pork and chicken, apparently.

Or that’s what I learn from this TikTok clip “Weird Groundhog Day Facts.”

U.S. readers better watch that clip today, if they are inclined at all to do so, as we approach the deadline for TikTok to be banned on September 17. Readers may also feel that they are experiencing their own little Groundhog Day, reliving the TikTok ban again and again, since this is the fourth deadline for TikTok to be blocked for U.S. users.

Constant Extensions

Each time, the deadline has been extended. TikTok voluntarily withdrew its app, briefly, ahead of the initial January 19 ban. But other than that one-day suspension of service, the stream of brain rot, interspersed with occasional insight, has continued to flow.

And we hear, coming out of two days of U.S.-China trade negotiations in Madrid, that governments of the world’s largest two economies have reached a deal for TikTok to stay in U.S. operation. You’d think there would be better things for the leaders of the world’s two superpower contenders to discuss. But no, they’re gonna discuss Zach King and how he made it look like he can ride a broomstick like Harry Potter, or how on May the Fourth, he used the force to make Star Wars truly come to life. 

May the fourth be with you! And may September 17 pass without TikTok suspension. 

Today is a day that Japan’s Nikkei 225 has topped 45,000 for the first time ever, briefly hitting an all-time high of 45,055 before closing at 44,902, itself the fourth record close in a row. Monday was a holiday in Japan, so it’s on Tuesday that we’re seeing the response to the expected U.S. rate cut this week, which has driven Wall Street to records, too.

Japan Record Close but No China Jump

But while the Nikkei did end the day up 0.3%, it’s progress on Sino-U.S. trade that has the longer-term implications.

We had disappointing data out of China on Monday in terms of industrial production, retail sales and fixed-asset investment. All three failed to reach economist forecasts for August, and were the weakest readings since last year. Home prices fell, too, and we already knew that export growth slowed to 4.4% year-on-year from 7.2% in July.

China in response is today unveiling measures designed to boost consumption, a mini-stimulus of sorts. The Ministry of Commerce led the nine government departments delivering 19 line items intended to open up services such as the Internet and culture, attract sporting events and ease investment into medical services, and attract overseas visitors to China.

China to Free Up Access to Internet?

We shall see. China maintains the “Great Firewall of China” to censor and control the Internet, down to the smallest blog post or comment. So it is in no way keen to open up that sector to outside ownership.

Most non-Chinese apps that deliver any sort of freedom of speech are banned. So it will be interesting to see what degree of foreign control of TikTok, currently owned by Beijing-based ByteDance, the Chinese government allows.

ByteDance is the world’s third-largest tech “unicorn,” according to Crunchbase, with a market valuation of US$220 billion. That ranks it behind only SpaceX and OpenAI.

A 2024 U.S. law bans social-media apps if they are “foreign adversary controlled,” with ByteDance and subsidiaries such as TikTok mentioned by name. So in theory, ByteDance should divest TikTok to owners outside China.

At the same time, Chinese law prevents the sale or transfer by a Chinese company of critical intellectual property such as the algorithm used to run TikTok. That would violate China’s national-security regulations as well as the 2020 Export Control Law.

Framework for Consensus for Talks on a Deal?

So TikTok — the international version of a separate app known as Douyin inside China — is between a rock and a hard place. It must be sold, by U.S. law, and it can’t be sold, by Chinese law. Much the same quandary over free speech (must allow, must censor) led TikTok to voluntarily withdraw operations from the city.

By the way, here’s what Zach King looks like between a rock and a hard place, as he tries to find the remote down the seat of his sofa.

Anyway, we hear now that there’s a new deal in the works.

“We have a framework for a TikTok deal,” Treasury Secretary Scott Bessent told reporters coming out of the talks in Madrid.

We shall see on that, too. “Framework for a deal” sounds a lot like “We don’t have the details sorted out.” And that’s probably why Bessent added:

“We’re not going to talk about the commercial terms of the deal. It’s between two private parties, but the commercial terms have been agreed upon.”

The Chinese negotiators made “aggressive asks” during the talks, although Bessent didn’t say what that involves.

China Makes 'Aggressive' Asks

We can bet that the Chinese team, led by Li Chenggang, are seeking a drastic reduction in U.S. tariffs. “Aggressive” likely means they are asking for tariffs to be removed, and access to higher-end chips made with U.S. technology to be restored.

Li also said Monday that the two countries have reached a “basic framework consensus,” language that leaves a lot of leeway. And frameworks can so easily fall apart.

Notably, we did not see big moves in Chinese stocks Monday and Tuesday. We would expect big moves should either China’s stimulus be significant or should a deal on China tariffs be reached.

Instead, the CSI 300 index of the largest mainland stocks fell 0.2% Tuesday. It is notching a decent 18.4% increase year-to-date, and has in the last month been catching up to the outperformance of the Chinese shares listed offshore, in Hong Kong.

The Hong Kong benchmark, the Hang Seng, ended flat Tuesday, but is up a sizable 34.7% in 2025. It is led by the strong showing of Alibaba Group Holding BABA (HK:9988), up 88.8% in 2025 on the backs of its forays into both Artificial Intelligence and quick commerce. The Labubu doll manufacturer Pop Mart International PMRTY (HK:9992), meanwhile, is up 181.3% year-to-date but slipping since its August 26 peak. Its bubble appears to have burst, as I noted in my last story.

It looks like the TikTok ban will be extended once more. U.S. President Donald Trump says on social media that the “big Trade Meeting” has “gone VERY WELL!”

What’s more, a “deal was also reached on a ‘certain’ company that young people in our Country very much wanted to save,” he writes. “They will be very happy!”

Trump is due to speak directly with Chinese President Xi Jinping on Friday. That, Bessent says, is when they will “complete” the deal.

While the likes of Oracle ORCL and Microsoft MSFT have been mentioned as potential TikTok part-owners in the past, we do not know how the new ownership will be structured. While Bessent says these are private parties involved in talks, the U.S. government has even reached an unprecedented profit-sharing deal with U.S. chipmakers Nvidia NVDA and Advanced Micro Devices AMD on selling into China.

Will TikTok actually sell? There’s no way China is going to let the algorithm go. We will need to watch for what trade and tech implications come out of those talks. On the U.S. side, I’m sure Trump wants the app to slip into friendly hands — preferably, his, or a close ally — but the intricacies of any deal will surely be complex.

At the time of publication, McMillan had positions in NVDA and MSFT.