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Data Sheet–Trump Could Throw Tech Under the Bus to Get a Trade Deal with China

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Chinese Vice Premier Liu He (R) talks with US Treasury Secretary Steven Mnuchin (2nd L), US Trade Representative Robert Lighthizer (2nd R) and US Ambassador to China Terry Branstad (L) after concluding their meeting at the Diaoyutai State Guesthouse in Beijing on May 1, 2019. Andy Wong—AFP/Getty Images

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Treasury secretary Steven Mnuchin and U.S. trade representative Robert Lighthizer were in Beijing today for the latest in their seemingly endless round of trade negotiations with Chinese vice premier Liu He.

The South China Morning Post reports officials from both sides emerged from discussions all smiles. Mnuchin, in a Tweet, described the meetings as “productive.” Liu and his team will be back in Washington for more talks next week. White House chief of staff Mick Mulvaney promises the haggling, which has dragged on since last summer, is really, truly, positively in the home stretch. “It won’t go on forever,” he told the Milken Institute Global Conference in Beverly Hills on Tuesday. “I think you’ll know one way or the other in the next couple of weeks.”

I’m not holding my breath.

And if a deal does happen that quickly, odds are it will be because Trump, not Chinese president Xi Jinping, is the one who blinks. Multiple reports in Western media (including this one in the New York Times) suggest that, although Chinese officials have shown flexibility in some areas, they’re digging in their heels on critical technology-related issues.

It has been widely reported that Liu has offered to loosen restrictions on cloud computing. A Chinese cybersecurity law adopted in 2017 requires foreign cloud companies to license their technology to local partners in order to operate in the country. Apple last year moved data of its Chinese customers to local servers, while Amazon and Microsoft partnered with Chinese operators. Beijing has said it might lift the 50% equity cap on foreign ownership. But that’s a relatively minor concession. As the Times reports, “Chinese negotiators have so far refused to relax tight regulations that block multinational companies from moving data they gather on their Chinese customers’ purchases, habits and whereabouts out of the country.” That’s a big deal.

Meanwhile, the Financial Times says Trump has dropped demands that China halt alleged instances of commercial cybertheft, softening his position on what his administration originally characterized as “Chinese government-conducted, sponsored, and tolerated cyber intrusions into U.S. commercial networks.” Instead, Trump will accept a “watered-down” commitment from Beijing.

FBI director Christopher Wray warned last week that “no country poses a broader, more severe intelligence collection threat than China.” U.S. deputy Adam Hickey alleged Beijing is “using its intelligence services…to target our private sector’s intellectual property.”

Even so, with a handful of exceptions, there has been no love lost between Trump and Silicon Valley’s bazillionaires. If China stands firm on technology issues, but promises to narrow the trade deficit with multi-billion dollar purchases of American soy beans and natural gas, will Trump walk away from a deal? It’s hard to imagine.

Clay Chandler
@claychandler
clay.chandler@fortune.com

NEWSWORTHY

Everything’s coming up roses. On Wall Street, Apple reported a weak, but no weaker than expected, quarter. Sales from the iPhone plunged 17% to $31 billion while overall revenue dropped 5% to $58 billion. Apple’s shares, already up 28% in 2019, jumped another 6% in premarket trading on Wednesday. That puts Apple’s stock market value right back around the $1 trillion mark, by the way. Advanced Micro Devices stock was already up 50% this year, but that didn’t stop investors from showing further enthusiasm after it reported better-than-expected results and a positive outlook for the rest of the year. Its share surged another 5%.

Moses supposes his toes’s are roses. At its annual F8 developer conference, Facebook unveiled a new direction for the world’s largest social network with a greater emphasis on privacy. “This isn’t just about building features,” CEO Mark Zuckerberg said. “We need to change a lot of ways we run this company.” Fortune’s Danielle Abril has a rundown of the major changes planned for Facebook’s various apps.

No rose without a thorn. Some big changes to the board of Google parent Alphabet. Former CEO Eric Schmidt and former cloud boss Diane Greene will depart. Gilead Sciences CFO Robin Washington joins.

A rose by any other name. There’s still plenty of big bucks flowing from the SoftBank spigot apparently. The Japanese company’s Latin America-focused Innovation Fund is investing $1 billion in food delivery startup Rappi, based in Bogota, Colombia.

Wild roses are fairest. Some fixes from yesterday’s newsletter. Angry Google employees will hold a sit-in today to protest the handing of sexual misconduct, not a walk out. And a representative for Amazon’s Ring unit didn’t appreciate the joke about news-delivering doorbells. To be clear, Ring’s news service isn’t part of its devices effort.

FOOD FOR THOUGHT

New innovations in technology sometimes have ripple effects. Sometimes the ripples are more significant than the original innovation. Blogger Florent Crivello has an essay about what he’s dubbed the “tough tomato principle.” When mechanical harvesting machinery revolutionized agriculture, farms bred new kinds of plants that worked best with the new tech. Tomatoes got thicker skins and stronger bodies (while tastiness declined). Now software is changing what can be produced in a couple of ways, Crivello outlines:

First, this anonymity reduces the reputational downside of experimentation. You can come up with any name — say, Satoshi Nakamoto — put your idea out there, and make billions without ever revealing your true identity. If it doesn’t work out or if it attracts too much controversy, you can always create a new pseudonym. A perk, again, exclusive to the digital world. Second, software makes geography irrelevant. It used to be that for anything to exist, it needed its fans to live close to each other. Now, you just need to find 1000 true fans, and they can live anywhere in the world…The final way software is changing what we can produce is by killing gatekeepers. Most people think this is important because of the efficiency gains of cutting the middle-man. But more importantly, removing gatekeepers means you don’t need to run your idea through a dozen filters before showing it to its final consumer. People get the uncut stuff directly — in all its glorious weirdness.

IN CASE YOU MISSED IT

The EU Wants to Build One of the World’s Largest Biometric Databases. What Could Possibly Go Wrong? By Grace Dobush

Why Airbnb Could Escape the Uber Trap in Europe By David Meyer

YouTube Gets Exclusive Streaming Rights for 13 MLB Games This Season By Chris Morris

BEFORE YOU GO

I haven’t been able to convince myself to fork over $6 a month to CBS for the network’s All Access streaming service just to watch the new series Star Trek: Discovery. But now it sounds like CBS is going hog wild with the fictional universe first imagined by Gene Roddenberry. Alongside Discovery, the network is prepping four more Trek-based series, including one starring Patrick Stewart, an animated show aimed at kids, and a spinoff of Discovery with Michelle Yeoh. That might be worth $6 a month alone.

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.