Data Sheet—Alibaba’s Jack Ma Says U.S.-China Trade War Could Last 20 Years. Here’s Why America’s Tech Industry Should Worry.
The U.S.-China trade war is here to stay. That was Alibaba founder Jack Ma’s bleak message to investors yesterday at the Chinese tech giant’s annual investor conference in Hangzhou. Economic conflict between the two nations will persist long after Donald Trump exits the White House, Ma predicted, and is “going to last a long time, maybe 20 years…. It’s going to be a mess [because] it’s not a trade war, it’s about competition between two countries.”
It’s hard to dispute Ma’s assessment given the tit-for-tat trade moves in Washington and Beijing this week. On Monday, Trump announced new trade duties of 10% on $200 billion worth of Chinese imports, effective September 24, and vowed to hike the rate to 25% next year if the U.S. and China can’t close a trade deal. China retaliated immediately by slapping new duties on $60 billion of American goods.
On Tuesday, Trump tweeted that further action by China would provoke “great and fast economic retaliation” from the U.S., and later repeated his threat to impose 25% tariffs on all Chinese imports. “We don’t want to do it, but probably we’ll have no choice,” he said. Beijing hinted it won’t send negotiators for proposed talks with Treasury Secretary Steven Mnuchin.
If Ma is right, the implications are enormous. Until this week, the prevailing view among investors, analysts and global business leaders remained that the U.S.-China faceoff is less a war than a “spat”—an overly dramatic lovers’ quarrel between two parties who know they’re too dependent on each other to ever part. The new view is that maybe the two parties really can’t stand each other, and are willing—determined, even—to reduce their inter-dependence even if that leaves both worse off. On Bloomberg, veteran China watcher Christopher Balding channeled Gwyneth Paltrow: “The trade war should…be reframed as a conscious uncoupling.”
For U.S. tech companies, the consequences of uncoupling with China could be dire. The FANGS—Facebook, Amazon, Netflix and Google’s parent Alphabet—won’t suffer. Facebook and Google are blocked in China. Amazon has only sliver of China’s e-commerce market, and Netflix has largely given up on China. But Cisco CEO Chuck Robbins acknowledged this week that a protracted trade war would have a “significant” impact on many of the company’s core products. Cisco, Dell, HP, IBM, Intel, Microsoft and Unisys source over half their products and components from China. And as China runs out of U.S. imports on which to slap retaliatory tariffs, how long before Beijing takes a bite out of Apple?
Sour green Apple. Apple has fully forked over nearly $17 billion in taxes owed to Ireland, per a 2016 European Commission ruling. The governing body ruled that Apple had benefited from an unfair tax policy, paying a rate of less than 1% versus the country’s standard 12.5%. The funds will remain in escrow while Apple appeals the Commission’s decision.
Upping the cover charge. Eventbrite has raised the proposed price of its planned IPO, set to take place this week. The online ticketing company marked up its shares to a range of $21 to $23 per share from its previous range of $19 to $21 per share. The lift seems to signal an expectation of strong demand for the company’s stock.
To your doorstep. Fortune broke news that Postmates, an on-demand delivery startup, raised $300 million in new funding ahead of an IPO likely set for next year. The deal, spearheaded by investment firm Tiger Global, is said to value the company at $1.2 billion. The funds will help Postmates compete against rival DoorDash, which raised $785 million in two rounds of fundraising this year.
Chip off the old block. Alibaba said it plans to open a subsidiary that will develop computer chips specializing in artificial intelligence applications next year. Jack Ma, the company’s cofounder and chairman, said China needs to control its core technology rather than rely on U.S. imports.
Slimming down. Evernote, a file-organizing software company, is laying off 15% of its workforce, or 54 people, TechCrunch reports. CEO Chris O’Neill informed his employees of the cost-cutting decision yesterday. “We must adjust quickly when part of our strategy is not meeting our expectations,” he wrote in an email to staff.
Get back to work. WeWork, the co-working startup, agreed to remove overly broad “non-compete” clauses that prevented employees from taking positions at rival firms in a settlement with New York’s attorney general. About 100 WeWork executives will continue to be covered by the restrictions, but the stipulation has been scrapped for the majority of the company’s more than 1,000-person strong workforce.
I smell a muskrat. The U.S. Justice Department is reportedly investigating Tesla after an unsubstantiated tweet by CEO Elon Musk said he had “funding secured” to take the company private, a move that juiced the company’s stock price. The criminal probe is happening alongside a separate civil inquiry reportedly underway at the Securities and Exchange Commission.
FOOD FOR THOUGHT
Time keeps on slipping, slipping, slipping. When Apple Watch debuted in 2014, people wondered whether it had the potential to be as big a hit as the iPhone. It took Apple a few years to iron out the kinks, honing in on the device’s true purpose. But with Apple’s latest debut, Watch Series 4, the company has apparently hit its stride. “With apologies to the new iPhones, the Apple Watch Series 4 was the most impressive thing Apple announced last week,” says Verge reviewer Dieter Bohn. “I think it lives up to the hype.” Read his review here.
The greatest Apple product comeback story of the past few years has, without a doubt, been the Apple Watch. Launched with great fanfare four years ago, the initial version tried to do way too much with way too little, and it had confusing software to boot. Worst of all, it was unclear what the original Apple Watch was even for. No single thing stood out.
Then Apple did what Apple often does: iterated, refined, and fixed. But as much as there were software and hardware improvements to the Series 2 and Series 3, the most important refinements were to the Apple Watch’s purpose. It gained clarity. It was for fitness and notifications. Eventually, when it was ready, Apple added better connectivity.
Now, with the Series 4, Apple is iterating again. And, importantly, it’s learned how to iterate the product’s hardware and its purpose at the same time. The Series 4 has finally achieved something like the original goal of the Apple Watch. It’s not quite a do-anything computer on your wrist, but it can be different things to different people now.
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BEFORE YOU GO
I ain’t afraid of no ghosts! Scientists at Purdue University in Indiana have hypothesized that they can force a single atom of Hydrogen to bond with…itself? The team has described the concept as a “ghost bond.” They theorize that they can, using a special barrage of electric and magnetic pulses, pin an excited electron in place for hundreds of microseconds. The speculative feat could open up new pathways to achieve chemical reactions, as this write-up from the American Physical Society explains.