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By Dawn Chmielewski, David Shepardson and Antoni Slodkowski
WASHINGTON/BEIJING (Reuters) -A deal to spin off the U.S. assets of TikTok was put on hold after China indicated it would not approve the deal following President Donald Trump's tariffs announcement this week, according to two sources familiar with the matter.
Trump on Friday extended by 75 days a deadline for ByteDance to sell U.S. assets of the popular short video app to a non-Chinese buyer, or face a ban that was supposed to have taken effect in January under a 2024 law.
The deal, the structure of which was largely finalized by Wednesday according to one of the sources, would have spun off TikTok's U.S. operations into a new company based in the U.S. and majority-owned and operated by U.S. investors. ByteDance would hold a position of less than 20%.
The deal had been approved by existing investors, new investors, ByteDance and the U.S. government, the source said.
ByteDance said early on Saturday that differences remained over the deal.
"(We are) still in talks with the U.S. government, but no agreement has been reached, and the two sides still have differences on many key issues," the company said in a statement on its official account on Chinese social media platform WeChat.
"In accordance with Chinese law, any agreement is subject to the relevant review procedures," it said.
The Chinese Embassy in Washington, asked about the status of a deal for TikTok, said in a statement: "China has stated its position on TikTok on multiple occasions. 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."
The Associated Press was first to report China's disapproval.
"The deal requires more work to ensure all necessary approvals are signed," Trump said on social media, explaining why he was extending the deadline he set in January that was supposed to have expired on Saturday. "We hope to continue working in good faith with China, who I understand is not very happy about our reciprocal tariffs."
China now faces a 54% tariff on goods imported into the United States after Trump announced he was hiking them by 34% this week, prompting China to retaliate on Friday. Trump has said he would be willing to reduce tariffs on China to get a deal done with ByteDance to sell the app used by 170 million Americans.
Trump has said his administration was in touch with four different groups about a prospective TikTok deal. He has not identified them.
A major stumbling block to any deal for TikTok's U.S. business is Chinese government approval. China has not made a public commitment to allow a sale and Trump's comments suggested renewed Chinese opposition.
"We look forward to working with TikTok and China to close the deal," Trump wrote on Friday.
"We do not want TikTok to 'go dark,'" Trump added.
Congress passed the measure last year with overwhelming bipartisan support, as lawmakers cited the risk of the Chinese government exploiting TikTok to spy on Americans and carry out covert influence operations. Democratic then-President Joe Biden signed it into law.
Some lawmakers have said Trump must enforce the law, which had required TikTok to stop operating by January 19 unless ByteDance had completed a divestiture of the app's U.S. assets. Trump began his second term as president on January 20 and opted not to enforce it.
The Justice Department in January told Apple and Google that it would not enforce the law, which led them to restore the app for new downloads.
The new Trump order will set a mid-June deadline for a deal.
The White House-led talks on the future of TikTok are coalescing around a plan for the biggest non-Chinese investors in parent company ByteDance to increase their stakes and acquire the app's U.S. operations, Reuters has reported.
The plan entails spinning off a U.S. entity for TikTok and diluting Chinese ownership in the new business to below the 20% threshold required by U.S. law, rescuing the app from a looming U.S. ban, sources have told Reuters.
Jeff Yass' Susquehanna International Group and Bill Ford's General Atlantic, both of which are represented on ByteDance's board, are leading discussions with the White House, Reuters has reported.
Walmart denied an ABC News report that it was also considering joining a group of investors in a deal for TikTok.
(Reporting by David Shepardson, Dawn Chmielewski and Katie Paul; Editing by Chizu Nomiyama, David Gregorio, Will Dunham, Rod Nickel, Leslie Adler and Edmund Klamann)
