President Donald Trump was very close to finalizing a deal with TikTok’s Chinese parent company, ByteDance Ltd., that would have prevented the popular app from being banned in the United States. However, the deal fell apart after China refused to approve it, especially following the recent announcement of new US tariffs, according to a source familiar with the situation.

After months of talks, US officials had nearly reached an agreement by Wednesday. The plan involved creating a new US-based version of TikTok that would be owned and run mostly by American investors. As part of the deal, ByteDance would reduce its ownership to below 20% in order to meet a US law that requires the Chinese company to give up control of TikTok or face a ban in the US. The plan quickly ran into trouble just a day later, the person said, after Trump decided to impose major tariffs on U.S. trading partners. These included new taxes that raised the total tariff on many Chinese goods to 54%. On Thursday, ByteDance representatives warned that Chinese authorities would no longer approve the plan unless there were talks about the tariffs. These tariffs have upset China and led to retaliatory actions against the U.S., the person added.

ByteDance didn’t respond right away when asked for a comment. With the future of the deal now uncertain, Trump said on Friday that he would give an extra 75 days to finalise it. At the same time, ByteDance publicly confirmed for the first time that it was in talks with the US government about TikTok. The company mentioned that some important issues still need to be sorted out and any deal would also need approval from the Chinese government.

Trump, posting on his Truth Social platform, repeated that he wants China to help work out the sale. He also suggested that the US might reduce tariffs if Beijing agrees to the deal. “We hope to continue working in Good Faith with China, which I understand is not very happy about our reciprocal tariffs,” Trump said in his post. “We do not want TikTok to ‘go dark.’ We look forward to working with TikTok and China to close the Deal.” A spokesperson from the Chinese embassy said that China has already clearly explained its stance on TikTok in the past.

“China has always respected and protected the legitimate rights and interests of enterprises and opposed practices that violate the basic principles of the market economy and harm the legitimate interests of enterprises,” spokesperson Liu Pengyu said in a statement. “China’s opposition to the imposition of additional tariffs has always been consistent and clear.” A law signed last year by former President Joe Biden required ByteDance to sell TikTok’s U.S. division by January 19. However, ByteDance has resisted selling the business, which is highly profitable and has been valued between $20 billion and $150 billion, depending on the terms of the deal and the technology involved. Trump has now issued two reprieves to buy time for an agreement to keep the app operational in the United States. The divest-or-ban law, which allows the president to grant a "one-time extension of not more than 90 days," is not applicable to the most recent extension, though. 

To help finalise a deal, Trump has assigned a few senior officials from his administration to review potential buyers. He has given this responsibility to Vice President JD Vance and National Security Advisor Mike Waltz. On Wednesday, Trump and other top officials looked over a proposal from a group of American investors, including Oracle Corp., Blackstone Inc., and venture capital firm Andreessen Horowitz. According to two people familiar with the meeting, this group has become a leading candidate to buy TikTok.

As per the current plan, outside investors would own 50% of TikTok’s US operations through a new company that would be separated from ByteDance. ByteDance’s existing American investors would also hold about 30% of the business, reducing ByteDance’s direct ownership to just under 20%. 

The proposal suggests that Oracle would buy a small share in TikTok’s U.S. operations and help ensure the safety of user data. According to this plan, TikTok’s powerful algorithm would still be owned by ByteDance, which might help gain approval from both the company and Chinese authorities. However, some people are against this idea. They say that if the algorithm stays with ByteDance, it might not meet the new U.S. law that requires TikTok to either be sold or banned. They’re also worried that China could still find ways to access user data.

Critics argue that letting ByteDance or China keep control of the algorithm won’t ease fears that TikTok could be used for spreading propaganda, even though ByteDance and Chinese officials have denied those claims. Trump's current support for TikTok is a big shift from what he did during his first term as President. Back in 2020, he tried to ban the app because he was worried about national security, but he wasn’t successful. However, during his recent campaign to return to the White House, he changed his approach. He started using TikTok to connect with younger voters and even said it played a big role in helping him win the election in November.

In 2020, Trump had wanted Oracle to buy TikTok from its Chinese owner, ByteDance. Walmart was also supposed to be part of that deal. But the plan fell apart near the end of his term because of legal issues with ByteDance and the growing challenges of the Covid-19 pandemic. This week, Amazon.com Inc. joined the competition by sending a bid to the White House through a letter addressed to Vance and Commerce Secretary Howard Lutnick, according to someone familiar with the situation. However, that offer hasn’t been taken very seriously by the administration, the person added. Other known offers include one from a group led by billionaire Frank McCourt and Reddit co-founder Alexis Ohanian; another from tech entrepreneur Jesse Tinsley and YouTube star MrBeast; a merger proposal from San Francisco-based Perplexity AI; and a bid from AppLovin Corp.