–Hey Taylor – Why is TikTok getting banned in the US? Is that actually happening? I don’t make my own videos, but I like the app and have never found it particularly dangerous, so I was wondering if you could explain what’s happening.

–Hey Eva – TikTok is potentially getting banned in the US, and we’ll find out a lot more about that in the coming months. The issue isn’t the content of the app, but rather what kind of info the Chinese parent company has access to. Lawmakers are demanding a change in TikTok ownership, but issues of free speech and free market operation will make this a tricky matter.

Here are the broad strokes.

1. TikTok doesn’t operate in China. This is one of those topics people talk about without having most of the pertinent information. In everyone’s defense, there’s a lot of mixed messaging about it in the media so it’s hard to keep all the facts straight. That said, it’s worth knowing that TikTok as you and I know it is headquartered in Los Angeles. In China, there’s another app called Douyin that’s essentially the same thing and was actually TikTok’s predecessor. So the app you use and the content you watch is mostly curated by a business that’s run in the US. However, that company is a subsidiary of ByteDance, the Chinese tech giant that originally developed Douyin and TikTok.

2. What does Chinese ownership mean? While our countries are definitely competitors, the US and Chinese economies are pretty intertwined. There’s nothing crazy about using a product or service that’s based out of China, so the idea of banning a Chinese business is a big deal. The reason people are up in arms about TikTok specifically is the amount of digital information that gets shared through the app, combined with the fact that all Chinese companies deal with some amount of government control. While not expressly owned by the People’s Republic of China, ByteDance is legally compelled to employ people who are party members. In short, a country that’s generally seen as adversarial has access to a company that has access to millions of Americans’ data.

3. What’s going to happen? The goal of current US legislation is to force a sale of the company. With TikTok being headquartered in California and owned by companies and investors across the globe, it wouldn’t be too much of a stretch to get majority ownership away from ByteDance. If the bill passes the Senate, there would theoretically be a five-month window for the company to be sold. If that didn’t happen, it’s anyone’s guess how things would proceed. TikTok is an enormous economic engine both in the United States and abroad, so banning it wouldn’t be as easy as flipping a switch, and the repercussions of a ban would be significant.

This situation is a test of how much sway the American government has in terms of international business, and it’s anyone’s guess how it’ll actually play out. It’s definitely an important issue worth monitoring. Thanks for the question, Eva!

TAYLOR J KOVAR

CHIEF EXECUTIVE OFFICER

CERTIFIED FINANCIAL PLANNER™