TikTok Law Signals A Shift In U.S. Foreign Investment Stance

The clock is ticking on a potential ban of TikTok now that President Joe Biden has signed into law a bill that gives its Chinese owner ByteDance nine months to either divest or see the app banned from use in the United States.

The TikTok order was part of a set of four bills that also included military aid for Ukraine, Israel, Taiwan and other US allies that was passed by the Senate April 23 and signed by Biden the next day.

TikTok has vowed to fight the order. “This unconstitutional law is a TikTok ban, and we will challenge it in court. We believe the facts and the law are clearly on our side, and we will ultimately prevail,” said a statement from TikTok posted on the app.

TikTok employs nearly 7,000 people in the U.S. and it is unclear what the order, if enforced, will mean for the company and its U.S. staff.

The bill follows growing frustration on Capitol Hill over perceived inaction by the Committee on Foreign Investment in the United States to provide proper scrutiny of TikTok after the 2017 acquisition by ByteDance of social media startup Musical.ly.

U.S. policymakers are increasingly scrutinizing how companies, particularly foreign-owned ones, collect, store and manage data due to the potential for misuse of this information. The U.S. government has expressed worries that ByteDance could potentially share user data with the Chinese government or engage in influence operations, raising significant security and privacy concerns — which the company denies.

More broadly, the TikTok order underscores ongoing shifts in U.S. foreign investment policy, particularly with regard to technology and data security from foreign entities. National security concerns have heightened in evaluating foreign investments or operations, especially those originating from countries with which the U.S. has complicated geopolitical relationships, such as China.

It is also part of a larger trend of heightened scrutiny and skepticism towards Chinese technology firms and investments in the U.S. This aligns with broader strategic objectives of countering Chinese influence in critical technology sectors and protecting domestic industries. The expansion of measures aimed at bolstering CFIUS’ enforcement power and broadening its scope also signals tighter controls ahead for investments in the U.S. deemed as sensitive.

Whether the ban is eventually enforced or gets tied up in court, the passage of the legislation marks a time period in which digital sovereignty, national security and foreign investment are increasingly interlinked.