The White House’s effort to force a divestiture of TikTok’s US operations has reportedly collapsed, at least for now, after Beijing refused to approve a proposed deal. The abrupt reversal results from a tariff-for-tariff standoff between Beijing and Washington, where the former feels “disrespected” by President Donald Trump’s insistence on raising tariffs on Chinese imports.
According to a Thursday report from Politico, the deal to spin TikTok’s US business into a new American-owned entity had been finalized. It was set for public announcement just days before a legal deadline.
Under the terms of the agreement, US investors would take majority ownership and control of the video app’s American operations, sources familiar with the negotiations said. ByteDance, the Beijing-based parent company of TikTok, would have retained only a minority stake to satisfy the Trump administration’s mandate for Chinese divestment.
Beijing kills TikTok deal after new tariff hikes
Sources now say the agreement fell apart as early as last week, when President Donald Trump imposed a “retaliatory” extra 34% tariff on Chinese imports, resonating the increase to what he called “China’s continued abuse of global trade norms.”
The next day, ByteDance representatives informed the White House that Beijing would no longer approve the divestiture. Last Friday, Trump signed an executive order to extend the deadline for ByteDance to sell TikTok’s US operations by 75 days, moving it to June 19.
Trump then went on to add the tariff rate on Chinese goods on Wednesday to 125% and accused China of showing “a lack of respect to the World’s Markets.”
At the same time, he reduced tariffs on other countries to 10% for a 90-day negotiation period. China President Xi Jinping and his camp were not happy about this, and the government’s decision to block the transaction could be a vengeful response to Trump’s trade penalties.
“They’re using Trump’s own strategy against him,” said Bill Reinsch, a former Commerce Department official now at the Center for Strategic and International Studies. “They’re showing they can retaliate without harming themselves while still targeting a political priority for the White House.”
President Trump’s modus operandi is to use tariffs to bring more countries to his negotiation table, which analysts say has blurred the lines between diplomacy and economics.
In his first term, he threatened import duties on Mexico to pressure immigration enforcement and linked military cooperation with South Korea and Germany to trade concessions. For Trump 2.0, he has expanded that approach, imposing tariffs and sanctions to pressure countries like Colombia and Canada to agree to new terms on border enforcement and deportation protocols.
Trump and the US want control over the TikTok app, which more than 170 million Americans use. The administration insists the platform is a national security threat because it is China-owned and has demanded a sale to US investors as a condition for continued operation within the United States.
Vice President JD Vance, who has been leading the negotiations, will have to find a way to expedite the stalled process, with one person close to his team calling it a “waiting game.”
White House still confident about TikTok deal
President Trump said he is still optimistic about the deal’s future, even when heads are still hot over trade differences.
“We have a deal with some very good people, some very rich companies that would do a great job with it,” Trump told reporters in the Oval Office on Wednesday. “It’s on the table, very much. But we’re going to have to wait and see what happens with China.”
On Capitol Hill, several lawmakers opposed to the deal query the legality of Trump’s actions and the security implications of any remaining Chinese ownership.
Senators Mark Warner and Ed Markey argue that the president does not have legal authority to extend the deadline. Warner also propounded that the terms of the current proposal would not meet existing legal requirements.
Senator Tom Cotton, chair of the Senate Intelligence Committee, said that any American investor in a compromised TikTok deal should not expect protection from Congress.
“To any American who wants to invest in some half-assed TikTok deal, Congress will never protect you from going into business with Communist China,” Cotton said.
Markey introduced legislation to extend the divestment deadline to October, but it was blocked in the Senate on Wednesday.
Under the law passed last year, TikTok was required to cease operations in the US by January 19 unless ByteDance had sold its American assets. President Trump, who began his second term on January 20, has twice extended enforcement deadlines to give room for more negotiations.
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