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The Clock Ticks for TikTok

Press RoomBy 9 Mins Read
The Clock Ticks for TikTok

The warnings against TikTok aren’t letting up, with U.S. security officials saying China is using the platform to meddle in elections and lawmakers calling the video app a global threat.

The sharp rhetoric isn’t new, but it raises a question for policymakers and business: Is the new push to force ByteDance, the company’s Chinese owners, to divest a real step change or just political posturing?

The House is barreling toward a vote on Wednesday that would force ByteDance to sell. Representative Steve Scalise, Republican of Louisiana and the majority leader, said yesterday that special measures would be used to speed the process.

A big worry is TikTok’s ability to push content. The Office of the Director of National Intelligence says that the Chinese government has used the platform to promote pro-Chinese narratives and to influence American elections. Beijing could try to use TikTok to “sideline critics of China and magnify U.S. divisions” in this year’s presidential race.

(Worth noting: China has also used X and Meta’s platforms to disseminate its messages.)

Critics say TikTok’s response is proof it’s spreading misinformation. The app has 170 million users in the U.S. and sent push alerts to users over 18, telling them to urge lawmakers to “stop a TikTok ban.” Congressional offices have been inundated with calls and messages.

But the House committee on the Chinese Communist Party that’s behind the legislation accused TikTok of deceiving Americans, saying the bill is not a ban but rather a proposal asking TikTok to sever ties with China and ByteDance.

Expect China to hit back. “It’s highly unlikely that Chinese leaders would permit ByteDance to divest from TikTok,” Gabriel Wildau, a China risk analyst at Teneo, told DealBook. “And the leadership has plenty of legal tools available to block a sale, so the bill under discussion is effectively a ban.”

But don’t expect business to abandon TikTok. The app has been under threat since 2020, when Donald Trump signed an executive order to force a divestment. (Trump has now changed his mind, adding to the confusion about whether the bill will become law.)

Yet TikTok has become a crucial platform for brands trying to connect with younger consumers. Advertisers spent nearly $1.2 billion on TikTok in the fourth quarter of 2023, up 43 percent compared to the first quarter last year.

“This is an issue that’s been there for years,” Martin Sorrell, a veteran advertising executive, told DealBook. “Until it gets resolved, one way or the other, I think advertisers will continue. They are not going to withdraw because of this latest flurry.”

A federal judge delivers a labor victory for big franchisers. A rule issued by the National Labor Relations Board that would hold companies like McDonald’s liable for the working conditions of franchisees’ employees was too broad, the judge, based in the Eastern District of Texas, decided. The N.L.R.B. may appeal the decision.

Meta sues a former executive, alleging the theft of confidential documents. The tech giant accused Dipinder Singh Khurana, most recently a vice president, of taking a “trove” of sensitive information when he went to an unidentified A.I. start-up, according to Bloomberg. At least eight Meta employees whose information was in the documents followed him to that company.

The Murdochs may team up with Jeff Zucker and Abu Dhabi for a British newspaper. News Corp. is in talks to partner with RedBird IMI, an investment firm led by Zucker, the former CNN chief, and backed by Emirati money, to buy The Telegraph, Bloomberg reports. That could ease concerns among British lawmakers about a foreign power controlling one of the country’s most prominent publications.

The N.A.A.C.P. calls on Black student-athletes to reconsider attending Florida colleges. The advocacy group cited the state’s policies banning the use of public money for diversity, equity and inclusion programs — leading to universities shutting their programs — as a reason to weigh going elsewhere. The campaign introduces a new area of conflict in the battle over D.E.I. programs.

Tuesday’s Consumer Price Index report is expected to be another decisive one for Wall Street and Washington.

The S&P 500 has taken a two-day break from its record run, as investors look for fresh signs of progress in the Fed’s battle with inflation. Jay Powell, the central bank’s chair, said last week that central bank policymakers were “not far” from cutting interest rates — if new data justified such a move. President Biden is also hoping for an upbeat number to bolster perceptions of his economic record.

Here’s what to watch: The report is expected to show that headline inflation held steady at 3.1 percent on an annual basis. That’s well above the Fed’s 2 percent target. But economists expect to see a slowdown in “core” inflation, which excludes volatile food and fuel prices. That would be welcome progress after last month’s surprisingly strong reading.

The bad news: Rising health care, insurance, and “shelter” costs continue to blunt progress. “Core services inflation should remain sticky-high,” Stephen Juneau, a Bank of America economist, wrote in a note last week. Another warning sign: The New York Fed’s monthly inflation survey yesterday showed that respondents saw prices climbing during the next three to five years.

Adding to the downbeat mood, Jamie Dimon, the C.E.O. of JPMorgan Chase, warned on Tuesday that a U.S. recession wasn’t “off the table.”

The good news: Goods inflation, particularly for cars, clothing and household furnishings, has been falling for months. That’s expected to be borne out in Tuesday’s figures, too. And some parts of the country “are in a low inflation environment,” Paul Donovan, an economist at UBS, wrote to investors on Tuesday. “This is all consistent with the Federal Reserve following inflation lower with a second quarter rate cut.”

The futures market on Tuesday was pricing in roughly three interest rate cuts this year, the first coming in June. That’s in line with the Fed’s own forecast — but well off what markets had priced in at the start of the year.

With his newly released budget proposal, President Biden has sharpened his political pitch for an election year: going populist by raising taxes on big businesses and the wealthy to pay for social programs. It has no chance of becoming law — but it’s a reminder for corporate America of where it stands as Biden seeks another term.

Biden called for raising $5 trillion in new taxes on companies and the rich, including:

  • Raising the corporate tax rate to 28 percent from 21 percent, where it was set in 2017;

  • Increasing the corporate minimum tax to 21 percent, up from the 15 percent set in 2022;

  • Quadrupling a levy on corporate stock buybacks to 4 percent and eliminating a tax break on purchases of corporate jets;

  • Lifting the capital-gains rate for those who earn more than $400,000 to 39.6 percent, while closing the so-called carried interest loophole for hedge fund and private equity executives;

  • And imposing a 25 percent “billionaire tax” on those whose wealth exceeds $100 million. (Valuing people’s fortunes will be tricky and the Treasury Department hasn’t specified how it would do so.)

Biden is trying to strike a delicate political balance. He wants to win over voters who are giving him low marks on the economy, while painting Donald Trump as an advocate for tax breaks for the rich. (Republicans criticized the proposed budget as “another glaring reminder of this administration’s insatiable appetite for reckless spending and the Democrats’ disregard for fiscal responsibility.”)

But Biden was also quick to rebut claims that he’s anti-business. “I’m a capitalist, man,” he said at a speech in New Hampshire. “Make all the money you want. Just begin to pay your fair share in taxes.”

There are limits to the tax-the-rich approach, however. Neil Irwin of Axios writes that even though Biden’s budget proposal would reduce the federal deficit by $3 trillion, it would require some optimistic economic assumptions to pull it off.

Bitcoin is hovering around $72,000 on Tuesday, a rally that has helped mint a new crop of crypto billionaires. The bullish mood can be felt throughout the sector.

The token has climbed by more than 50 percent since the S.E.C. approved the first Bitcoin exchange traded-funds in January, bringing a wave of mainstream investors into crypto trading. A raft of similar funds linked to Ethereum, another popular digital currency, could get the green light by May.

Coinbase is pushing the S.E.C. for more favorable treatment. The Nasdaq-listed cryptocurrency exchange’s stock has surged alongside Bitcoin this year. Yesterday, Coinbase filed a lawsuit against the regulator, accusing it of “capricious” behavior. It says the agency has shirked its responsibility to write clear rules on how the industry should operate.

Tough tactics have worked before. Grayscale Investments, a digital asset manager, sued the S.E.C. last year after the regulator denied its application for a Bitcoin exchange-traded fund. A panel of judges agreed that the agency acted arbitrarily, a ruling that paved the way for January’s approval of new Bitcoin funds.

The industry is also flexing its political muscles. Coinbase and others backed a network of well-funded super PACs that some say helped fell crypto-skeptic Katie Porter, the Democratic representative from California, who lost her race to be the party’s nominee for the Senate.

The sector is now looking at new targets to boost, or topple. “The crypto advocacy community is feeling pretty good right now,” said Kristin Smith, C.E.O. of the trade group Blockchain Association. “For the first time since Bitcoin was created 15 years ago, we have the tools in place, on the policy front and the political front.”

The sector got another shot in the arm yesterday when Travis Hill, the F.D.I.C.’s vice chair, called on regulators to ease their restrictions on how banks handle customers’ digital assets.

Deals

  • Donald Trump reportedly asked Elon Musk last summer if he was interested in buying Truth Social, the former president’s social media platform. (WaPo)

  • G/O Media agreed to sell Deadspin, the sports news website, to a European media company — and will lay off all existing employees. (NYT)

Artificial intelligence

Best of the rest

  • A new crop of media start-ups — including Semafor and Puck — is following a novel plan for survival: lots of different revenue sources, narrow coverage areas and staying small. (NYT)

  • “One Day, Israeli Tech Founder Was Closing Deals. The Next, He Was Near Death on a Gaza Battlefield” (WSJ)

  • Why U.S. foreign policy is more dependent on corporate America — and vice versa — than ever before. (Foreign Affairs)

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