(Preview) The TikTok Fiasco Continues; Breathing Room on Tariffs; The RMB Calculus; Notes on Taiwan and Hollywood
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Hello and welcome to Sharp China. I'm Andrew Sharp and you are listening to a free preview of today's episode. Hello and welcome back to another episode of Sharp China. I'm Andrew Sharp and on the other line, Bill Bishop. Bill, how you doing? Hello, Andrew. Hi, everybody. I'm doing well. Finally thawing out a little bit in D.C.,

thawing out. Is it calming down or is this sort of the calm before the storm? What do you think? Oh, I mean the thaw in D.C. in terms of the weather. I think the... No, I know. The thaw in terms of this new administration, I think we're more in the...

leading edges of the storm. Okay, well, get ready for a ride the next couple of years. I am happy that it's not 15 degrees anymore. That was getting old. So thank you to the weather gods. And we'll begin today with TikTok. I

I didn't put it on the rundown here, but it occurs to me that we hadn't recorded since TikTok did briefly go offline over the weekend before returning and telling users to thank President Trump for his heroic work helping to negotiate a resolution. And then, of course, we had show chew at the inauguration.

I had forgotten until this past weekend that one of the senators who wanted Xochitl investigated for perjury was our new Secretary of State, Marco Rubio. So all part of the fun. In case anyone missed it, those things happened. And we will begin with one of dozens of executive orders that President Trump signed over the past few days. This came on Monday night, day one. Trump signed an order which read in part,

Yes.

During this period, the Department of Justice shall take no action to enforce the act or impose any penalties against any entity for any noncompliance with the act.

In light of this direction, even after the expiration of the above specified period, the Department of Justice shall not take any action to enforce the act or impose any penalties against any entity for any conduct that occurred during the above specified period or any period prior to the issuance of this order.

And of course, the act he's referring to there is the Protecting Americans from Foreign Adversary Controlled Applications Act, which became law nine months ago and requires data providers and app stores to stop hosting TikTok unless it's fully divested from its parent company, ByteDance.

And related to ByteDance, we also heard from Bill Ford, who's the CEO of an investment firm called General Atlantic and a board member of ByteDance, General Atlantic. And a significant shareholder. Indeed. He said at Davos this week, the objective is for TikTok to continue operating. I have a sense of optimism that we can meet U.S. security needs and not sell the company.

So, Bill, there have been a lot of moving pieces the past few weeks. What are you paying attention to now besides the president of the United States just completely disregarding federal law here?

Well, I think that's really the key thing. It's just complete... It's just lawless. Yeah. It is. And what's shocking, but not shocking because it's DC, is actually the law... So we had our video chat on Friday right after the Supreme Court decision. And then the law took effect, I guess, 12.01 a.m. on Sunday Eastern Time. The app actually went...

TikTok went offline before midnight on Saturday Eastern time, I think, because information had a good story about how Oracle had made the decision to take it offline and it was going to take them a few hours. So they wanted to make sure they were complying with the law. So that's why it was actually down before midnight.

Yeah, it was the second half of the Commanders playoff win. A new era for the Commanders, NFC Championship game. Can we just do Sharp Commanders? No, but go Commanders on Sunday. But so the app went offline.

And, you know, you had what was, you know, we talked about it last Friday. You know, you have people like Chuck Schumer. You had the Biden White House saying, you know, oh, we're not going to enforce the law. Chuck Schumer saying, find a way to not enforce the law. Congress, Democratic Congress, like Ro Khanna,

I saw he was on a podcast talking about how... Basically asking the Biden administration, like, don't enforce the law, which is kind of nuts. Which they complied with, which was craven and cowardly in its own right, but then was one-upped. Right. So you end up with a situation where there's a law in the books and you have a bunch of lawmakers and people in the executive branch saying, don't enforce it. However, Apple and Google...

Clearly have good lawyers who are extremely worried about the many billions of dollars of liability that breaking this law will incur. We're moved to the app store and here we are five days later, four days later, and it's still not in their app stores. Oracle, though, put their servers back online and restored the service. And then on Monday, we got the EO back

Again, didn't seem to impact the legal teams thinking at Apple and Oracle, but you have the president basically saying he can do what he wants, ignore the provisions of the law. And so we're now in this period. Now, I guess it was 75 days from January, according to President Trump's executive order.

where they're just going to try and work out a deal. And what has been described both by the president, but then also investors like Bill Ford, are deal structures that aren't actually allowed by the law. And so I think there are several different layers here. One is, will someone sue to challenge this executive order? We got news today, just like an hour ago, that there's already been a lawsuit over another executive order about birthright citizenship, which the courts have basically...

you know, they, they rule the EO was invalid. Right. Um, and so is there anyone with standing who wants to sue to try and block this Tik TOK EO so far, no one has figured out or decided they want to try and take that risk. Uh,

You have Oracle, which is violating the law and which is potentially racking up billions of dollars in civil liability of potential fines. And the statute of limitations is five years. So Trump could be out of office and they could still be retroactively liable under a new Department of Justice. But...

But it could also be that they get the deal done and Trump says no, and then he wants something from Oracle in three years and says, oh, you know what? You guys broke the law. Yeah. We're in uncharted territory as far as an evolving understanding of what the law is, how reliable this executive order would be in a legal setting. Right.

But I think Larry Ellison, as a founder of Oracle, is clearly just more risk tolerant than Tim Cook or Sundar Pichai or some of the other people. This is a great question because Apple and Google, Amazon, the App Store is not listing the app is annoying. New users can't get it. If there's an update, you can't update it unless you can sideload on Android phones.

But Oracle is a key infrastructure provider where if they say they're not going to do it, then the app dies. The service goes down. The app dies. Right? Yeah. And so one of the questions really is, and so far there's been no reporting, is was there anything promised to Oracle? Did, for example, conceivably TikTok ByteDance could have just wired them a bunch of money ahead of time just to say, make it worth their while? We don't know. But it is a very interesting decision that

When you look at three massive Silicon Valley companies with really strong in-house legal teams, the ability to afford the best lawyers on the planet, two of them said, there's too much liability. We have to abide by the law. One of them said, who cares? We'll just do what we want.

Right. Well, and they're public companies and state AGs could potentially bring a case. There could be securities litigation. I mean, Tom Cotton surfaced those possibilities last week. Right. So what you have so far is the GOP supporters of the bill, the Republican supporters of the bill. You had Tom Cotton's and Senator Ricketts'

issue a statement on Sunday when Biden was still president, basically saying the law is the law. Crickets since Trump was inaugurated. Crickets for rickets, yes. Speaker Johnson on Sunday, I think it was meet the press, talk about the law, and then crickets since Trump was inaugurated. And so the question really is, will there be any actual pushback in the Senate or the House from the Republicans? Or are they just going to kind of clam up

and hope somebody else sues to challenge the standing, you know, gets standing to be able to sue to challenge this EO? Or do they just think that at the end of the day, after 75 days, they'll be able to back channel so that the president knows that any potential deal for TikTok has to actually fit with what is described in the law? One of the things that's interesting in the executive order was

This language, if you remember, there was this Project Texas, which was something that the ByteDance TikTok folks had suggested and spent over a billion dollars to put all their data together.

in physically separate in the U.S. Oracle was the big contractor for it. They were negotiating with the U.S. government for quite some time. Through an interagency process, the U.S. government decided, multiple agencies decided it was not enough to actually mitigate the national security concerns. But in the executive order, there is language. He says, my administration must also review sensitive intelligence-related documents

to those concerns and evaluate the sufficiency of mitigation measures TikTok has taken to date. That is clearly trying to reopen the door to Project Texas.

Interesting. And which is not not allowed in the law. Again, this is lawless. Right. Well, I mean, it's depressing. And I said this on Sharp Tech this week. But what's frustrating to me is that TikTok is a clear national security threat and a risk that should be unacceptable to Americans, particularly given some of the other demonstrations of PRC intent over the past few years, whether it's the hacking concerns or just generally trying to undermine U.S. interests.

And there's a version of this story. Project Texas is actually a great example where this was an example of great work in the media, great reporters working over the past few years to document various abuses by TikTok. And in, in project Texas's case, like there was great reporting on the ways in which that was not sufficient, even beyond any sort of intelligence reports. And, and,

Then over the last couple of years, like a small group of lawmakers last year specifically got together to craft a bill very carefully to make sure that it would withstand constitutional scrutiny. They drafted it very quietly to avoid interference from TikTok lobbyists or other members of Congress who are maybe being influenced by TikTok lobbyists.

And then you had White House support and a comprehensive judicial review of the law to guarantee that it was on sound footing. Plus, ByteDance had a nine month opportunity to divest and allow Americans to continue using the app.

All of it was working properly. It was almost a great reminder that the system can still work and can still rise to the moment to deal with obvious problems. But instead of that sort of refreshing indication of institutional health,

What we're getting is just much murkier. It's not a catastrophe or anything, but I truly don't know how this will end. I mean, like you mentioned Larry Ellison, Trump was speaking in the Oval Office and said, I'm open to Elon Musk buying TikTok if he wants it. I'm also open to Larry Ellison buying it. You're a rich guy, Larry. Do you want it? I want them to do a 50-50 joint venture deal with America, right?

With us, it's worth trillions. Which is like not part of the law. I mean, again, that's the thing. I mean, I have two notes on that quote specifically. One, there's been a lot of oligarchy talk lately, and I think most of that rhetoric is overblown, at least if we're talking about distinguishing characteristics between Trump and recent presidencies.

I will say, as someone who studied the Russian oligarchy in a past life, Trump sitting in the Oval Office and talking about the state taking control of TikTok and then just giving it to Larry or Elon, that's pretty on the nose as far as oligarchy is in action. Well...

Sorry, go ahead. Well, no, the bigger question is like the joint venture idea is completely incoherent. I have no idea what that means. It doesn't address any of the stated security concerns, whether it's the algorithm or the data access. I don't know whether he's talking about a joint venture between the U.S. and ByteDance or.

or the government and American private investors? Nobody knows. I mean, I shouldn't say maybe he does know. Maybe there's a plan being worked on. But from what we can see publicly, it's incoherent. Yeah. And so I guess more will be revealed. I mean, I think as far as congressional pressure on the executive branch to fall in line with, again, federal law that is operative,

Maybe it takes 75 days and that only happens. There's only pressure and pushback once we get to the end of the 75-day period here. And someone like Tom Cotton is just biding his time to wait and see what sort of divestiture options emerge. I'm not sure. Again, I...

Maybe. There's also, I think, Ro Khanna, who's Democrat in the House, and Rand Paul, Senator Rand Paul, introduced a bill yesterday to repeal the law.

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