MSFT Microsoft Corporation

By Bob Davis, Alex Leary and Kate Davidson 

WASHINGTON -- President Trump said he was ready to approve a purchase of the Chinese video-sharing app Tik Tok, but only if the government receives "a lot of money" in exchange -- an assertion of presidential power that appeared to lack precedent.

Microsoft Corp. said it hopes to acquire TikTok's business in the U.S. and three other countries. Mr. Trump said he told the company's chief executive, Satya Nadella, that "a very substantial portion of that price is going to have to come into the Treasury of the United States because we're making it possible for this deal to happen."

Legal analysts and others pointed out that the White House had been pushing for a sale of TikTok to U.S. owners, making the demand for payment all the more extraordinary.

"It is completely unorthodox for a president to propose that the U.S. take a cut of a business deal, especially a deal that he has orchestrated. The idea also is probably illegal and unethical," said Carl Tobias, a law professor at the University of Richmond.

While the U.S. government for decades has analyzed foreign investments in the U.S. to see whether they could create national-security problems, the decisions are usually left to the members of a secretive interagency group called the Committee on Foreign Investment in the U.S.

Under Mr. Trump, the U.S. has taken a hard line on China through CFIUS. Last year, for instance, CFIUS ordered a Chinese company to sell gay-dating app Grindr, citing the risk that Beijing could exploit the personal data it collects.

Mr. Trump and his national-security team cited similar concerns about TikTok, raising the prospect that its Chinese owner, Beijing-based ByteDance Ltd., could be forced to share data it collects on U.S. users with the Chinese government.

With TikTok, however, the president's requirement for a payment showed a much greater involvement. That follows two years of personal attention to the trade battle with China, including deciding how and when to assess tariffs -- and when to back off and cut a deal.

"This is an extension of Trump's generalized view that he can micromanage the industrial sphere," said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.

Mr. Hufbauer said Mr. Trump's proposal reminded him of medieval kings who oversaw salt monopolies. "If you wanted to mine some salt, you put money into royal Treasury," he said.

The president, a former New York real-estate developer, often presents himself as a master negotiator on everything from international trade accords to dealings with North Korean leader Kim Jong Un.

With TikTok, he likened his payment idea to "key money" -- or an extra fee paid to secure a hard-to-get property. "It's a little bit like the landlord-tenant," the GOP president said at the White House on Monday. "Without a lease, the tenant has nothing."

"It's a great asset," Mr. Trump said of TikTok. "But it's not a great asset in the United States unless they have the approval of the United States."

Later in the day, he was asked to clarify his remarks. "It would come from the sale," Mr. Trump said. "Whatever the number is, it would come from the sale. Which nobody else would be thinking about but me. But that's the way I think. And I think it's very fair."

Washington's move, in the eyes of Beijing, essentially strong-arms one of China's most valuable global tech companies into selling a lucrative overseas unit. Chinese officials say it is further proof that the U.S. views any Chinese tech company with international success as a challenge to its technology primacy, regardless of the product or how it runs its business.

Mr. Trump's comments also amplify how deeply he involves himself in trade and investment decisions, which economic historians also say is a big departure from the past.

Douglas Irwin, a Dartmouth College economic historian, said early in Franklin Roosevelt's first term, his advisers debated whether the U.S. should cut barter deals with other governments, but the president ultimately rejected the idea and negotiated trade agreements instead. No president since has looked to get so deeply entwined with commercial deals with foreign companies, he said.

Tony Fratto, a former George W. Bush Treasury official and partner at the Washington public-affairs firm Hamilton Place Strategies, said it was unlikely any payment would stand up.

"There is no situation where either Microsoft or the Chinese or TikTok or ByteDance will be sending a check to the U.S. government, except in the normal course of their regular tax obligations," Mr. Fratto said.

The president also often made broad assertions of presidential power, which may be popular with his political base, only to back off later. In August, 2019, at the height of the U.S.-China trade battle, he tweeted that he "hereby ordered (U.S. companies) to immediately start looking for an alternative to China, including bringing your companies HOME." Nothing came of that.

This year, Mr. Trump said he had the power to force states to reopen their economies amid the coronavirus pandemic, though he backed off that claim, too. He has recently pointed to a Supreme Court decision on an immigration program for young undocumented residents, arguing that it gives him authority to make more sweeping changes without Congress. He cited the same decision as grounds for a health-care overhaul, though he has yet to offer one.

"Trump often tries to prove how strong he is by taking novel and extreme positions," said Alex Conant, a Republican strategist in Washington. "A lot of people in Washington may roll their eyes at Trump's off-the-wall proposals, but we shouldn't underestimate their simplistic appeal to many voters."

The comments, though, can make life tough for companies, which don't want problems in Washington.

In this case, Microsoft declined to comment beyond its statement released in a blog post Sunday night. In that post, Microsoft said it is "committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury." It wasn't clear whether Microsoft was talking about the taxes it would pay or some other arrangement.

The White House referred questions on how a payment would work to the Treasury Department. A Treasury spokeswoman referred a reporter back to the president's comments, and declined to comment further.

Mr. Trump indicated a deadline of Sept. 15, after which TikTok would be banned in the U.S. Microsoft said Sunday that it would move quickly to pursue discussions with ByteDance and it aims to complete the negotiations by Sept. 15.

TikTok says it has 100 million users in the U.S. A TikTok spokeswoman on Monday said the platform is "committed to continuing to bring joy to families and meaningful careers to those who create on our platform....TikTok will be here for many years to come."

--Aaron Tilley contributed to this article.

Write to Bob Davis at bob.davis@wsj.com, Alex Leary at alex.leary@wsj.com and Kate Davidson at kate.davidson@wsj.com

(END) Dow Jones Newswires

August 03, 2020 21:36 ET (01:36 GMT)

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