First time in 15 months. Is the latest bitcoin bump here to stay or just another bubble . The clock is ticking on President Trumps next round of china tariffs. A proposed new wave of tariffs set to go into effect as early as next month end half of those and half of the 300 billion of targeted goods are tech related. A new article details how chinas Tech Industry is mostly insulated but there is one area where it is still dependent, very dependent. The semiconductor chip. Over the last decadeplus, china has seen a surge of chip imports that surpasses 300 billion. To further breakdown the effects on tech in both countries, we have bloomberg techs ian king, who covers the chip industry and the coauthor of the aforementioned article. Also with us, global Senior Editor brad stone. Chinas greatest reliance is on semiconductors. How so . Ian esoteric parts like broadcoms switch chip, more common parts like an intel microprocessor, china really cant replicate those yet. They have been trying for years and havent come close. Emily why not . Ian it is difficult. When you are arranging tens of billions of transistors on something the size of a postage stamp, you have to kind of know what you are doing. Making them costs so much money. They have never been able to dollar develop that skill set. Emily which companies in particular in china are the most vulnerable . Ian you name it. It is the biggest pc market. It is also home to some of the largest pc makers like lenovo. They need these products. Huawei, it goes without saying. They wouldnt be able to make their core routers. They need memory chips and all kinds of things. Absolutely essential. Emily brad, you have a piece out about how u. S. Tech giants, even though they may be complaining about the trade war, are in the best position to weather it. Brad Big Companies like apple have the cash and negotiating power. Foxconn has already talked about moving production to other companies in southeast asia. India, malaysia, thailand, taiwan. Of course, the Trump Administration would like to see it here in the u. S. That is unlikely to happen. But i think they are worried. We saw a bunch of letters go to the u. S. Trade representative last week. Apple said the tariffs will hit iphones, ipads, macbooks, air pods. They say it will hurt apples glow to global competitiveness. Emily as you mentioned, they do have the negotiating power and we dont know if that will pay off. Brad it has worked in the past. Some of these product categories were on previous lists of tariffs as early as early last year. They got off the list at the last second. I think the Tech Companies are hoping for that kind of reprieve. We will see what happens at the g20. Emily huawei, they are dependent on u. S. Chips somewhat. They also make two thirds of their own chips, right . Ian smartphone. The key component of the smartphone is the nickel processor. They have been arguably the most Successful Company outside of apple in weaning them self off qualcomms technology. They can supply themselves in that particular market very strongly. Emily there is a line that i love your you say laptops, smartphones, toy drones. Have these people know compassionate all . My drones even . Brad they are coming for our drones. Emily how would you break apple versus amazon, for example . Amazon is shutting down its entire china marketplace next month. Chinese consumers brad it is interesting. You would think amazon might not be that exposed. They have a huge business there among the small thirdparty sellers that sell on the amazon marketplace. Our colleagues have a great story out today. These companies, unlike apple and amazon, they have no negotiating power. They are one or two people shops, they sell everything on the amazon marketplace. Really it is the uncertain that uncertainty that is impacting them. They have to get their holiday orders in now. It is not that easy for them to look for another factory in india. Emily what is plan b . Ian i think their plan b is to cut orders and raise prices. That will have an interesting impact on amazons holiday this year. If selection is going down, prices are going up, it is another way the u. S. Consumer is going to be hurt by the trade war. Emily how does that ripple back and impact china if u. S. Prices rise . China also depends on a lot of these companies in china. Ian apple is an example of that. Yes, maybe we dont need that many iphones, but so many people are employed directly as a result of manufacturing chain. That cant help but impact the economy. You have all these relatively high paid jobs, tax revenue, if that goes away that fundamentally undermines the chinese economy. Emily what is their plan b . Ian a lot of people dont realize just how powerful they are. When trade sanctions have been used in the past against countries like korea and japan, they are relatively small domestic economies. China mobile has more subscribers than the u. S. Has people. They are their own center of gravity. There are people who have never looked at Google Search because they never needed to. They are not using apps supplied in the u. S. Because there are enough gravity in the market on its own terms. Emily we dont know if the tariffs will go into effect. We are still waiting for this meeting to happen between President Trump and xi. You wonder, even if these new tariffs do not go into effect, if this uncertainty has been so intense for these companies that they are already moving to plan b and start making arrangements for the future . Brad everything we heard from our reporting in asia and the reporting of others suggests it Companies Like apple are looking at other sources of manufacturing outside china. It makes a lot of sense. The one thing i would say, if you look at the market lately, i get the sense that maybe this market thinks there will be a resolution to this. Otherwise, we would see a lot more volatility in the stock markets than we have seen. Emily are you optimistic . Ian it depends whether you are talking about the market or the companies. If you talk to executives, the companies are not keen to go on the record. Is they are saying, this wrong way to go about things. We have so much to lose. We want to resolution. Emily what is next . Brad i think all eyes are on the g20. I think there is an assumption the Tech Companies have proven their case that this will be difficult or them and bad for the american customer. If the president takes that into account, we are likely to see some form of resolution, may be shortterm relief to these product categories. Emily thank you both. Amazon Web Services Says it has fixed an issue that impacted conductivity between some Customer Networks and multiple regions. They observed a problem with an external provider outside of its networks monday. It says conductivity to other providers was not impacted. Coming up, facebook is building its own socalled Supreme Court for content moderation. But will that solve all of its problems . We will discuss facebooks plan for an oversight board. If you like bloomberg news, check us out on the radio, the bloomberg app, bloomberg. Com, and in the u. S. , on sirius xm. This is bloomberg. Emily facebook is looking to create a new content oversight board. The social media giant is hosting a series of simulations across the globe as they plan an independent board to review controversial content moderation decisions. The board will decide on appeals that have been removed or removed in ever. Zuckerberg has mentioned the idea for independent appeals process is almost like a Supreme Court, quote unquote, his words. Joining us to discuss is kurt wagner, who covers facebook. Kurt, the Supreme Court is nominated by president s and confirmed by congress. How would this be put together . Kurt that is the biggest question, that they want it to be an independent group but we dont know exactly who is going to be picked, how big it will be. They say it will be around 40 people and then they break up into small groups of 35 to review individual cases. How do you pick a group of 40 people that accurately reflects a billion people . That is one of the biggest challenges. Emily how do you do that if facebook is doing the picking . It will be really hard and facebook is also paying for this board, so independence is always going to be a question. That is inevitable in the situation. The point that kurt made is a good one, that facebook is now a global platform. They have many users in places like india, indonesia, other places that have different values than facebook in the United States that was founded largely by american executives. The question is, will the board draw from people from those countries that are now basically facebooks future . Emily talk to us about these simulations that facebook is conducting. A controversial decision comes to this group of people and then they debate. Kurt i sat in on one that was at facebooks headquarters in california. It was about 30 employees. They presented them with a post that was controversial. Someone had listed 70 different academics and accuse them without any proof of being sexual harassers. They left the list up and said to add more names to the list if you know someone else who is a sexual harasser. Obviously that is a dramatic and severe claim to make. Facebook wanted its employees to discuss, is this the kind of post that should be left up or taken down . It was two hours long and they went through different questions. They are trying to get at, how do people get into this stuff . What kind of questions do they ask . So when the real board has to make decisions like this, they are prepared. Emily some of these decisions are cultural. Who are these people . Are these all englishspeaking people . How will they understand the nuances of the situation with the rohingya in myanmar . Shira that will be difficult. Facebook has said, as they talked about this out loud, to their credit, they have sought input on this oversight board. Would capthe board outside experts. They are dealing with an issue that is culturally specific to germany or india, that they would seek experts in those areas. Lets not gloss over the fact that the vast majority of content decisions, judgment calls about what is ok to leave up on facebook, are made by this kind of lowwage contract workforce. Not by the highgloss, Supreme Court type authority. Emily there has been more reporting on this from the verge recently about the often horrifying situations that these content moderators have to go through day in and day out. Does that jive with your reporting . Kurt it is a really terrible job. Think about policing the internet from the most violent and graphic stuff and seeing that consistently. That is what these folks do. The board would not replace that job. Say,the board would do is this is a decision our moderators made. Lets review it and see if we agree with it now that we have a little more time to look at the facts or discuss it among the group. It is speed. Something pops up on the screen, they have to watch it. Does it violate the policy, yes or no, and make a decision. Emily theres a question whether facebook should be doing this at all. Facebook has made the argument that perhaps this should be a government decision. Nick clegg, their new chief of policy, spoke to the bbc and said he doesnt think it is in any way conceivable and i dont think it is right for them to set the rules for the road as far as how tech serves society. You wonder, would they be better off having governments make these decisions . Is that even plausible now . Shira it doesnt really feel plausible, does it . I understand the position facebook is in. They created these platforms where many billions of people congregate every day. It turns out that facebook is a reflection, and amplification of the best and worst in humanity. Now that the genie is out of the bottle, they want to basically turn over a little bit of responsibility. I think what facebook wants, in this engineering mindset, is, give us a formulaic solution. If x and y happen, we do z. I dont think we will ever be in a position where that is feasible given that the internet reflects people and they can be and people cant be reduced to formulas. Emily how comfortable is facebook and facebook insiders with this formula . This proposed formula. Kurt i think they want this. Mark zuckerberg does not want to be the one at the top of this foodchain saying, this is taken down, this stays up, ultimately that is my call. I dont think he wants the responsibility. We know he doesnt want that responsibility because he has said so repeatedly. I think they see this as a very clean option for solving those problems that no longer puts it at their feet. Emily when might this be put together . Kurt the goal is, by the end of the year, the first version of the board. Theoretically if it works, we may still be talking about it decades from now. Emily we will see. Thank you both. Coming up, spotify downgraded to underperform. We will speak to an analyst who says the Music Streaming Company could have issues down the road to profits. That is next. Iserg techs wives Live Streaming on twitter. Check us out on twitter technology. This is bloomberg. Ulta sally beauty and beauty extended losses after amazon announced it launched a beauty store. Sally shares scott saw a tumble and ulta fell as much as 4. 5 for its biggest intraday decline since may 31. Evercore isi is taking a stand on the Music Service spotify. The firm has downgraded the stock to underperform to 110 from 125. An analyst wrote that he simply doesnt see a path by which spotify can generate a level of gross profit demanded by the street. Kevin is with us now. Kevin, walk us through your argument. Kevin i guess the argument comes down to the question, is there a path for the level of gross profitability that current street estimates are calling for . We see a challenging path. If you look through kind of what the stock has done recently, the move from 120 to 150, we think a lot of that has to do with a degree of confidence in the nearterm relief by way of content costs and the ability to drive high revenue ancillary revenue streams. We think the likely outcome of some of those nearterm events is going to disappoint investors in a way that will lead shares lower over the nearterm. Longerterm, we main remain concerned around over the degree of competition and spotifys leverage over the labels that control many of their costs. Emily which competitors specifically . It is really apple music right now, right . Kevin in the United States, it is really apple music. But if you go market by market, it is a whole host of competitors. If we look at india, indonesia, turkey, brazil, there is usually a close second or leading competitor that doesnt get reflected when you look at the global averages. The market is far more competitive than indicated by just those headline numbers. Emily what kind of content bets are you skeptical of . They have doubled down on podcasts. Kevin podcasts could drive growth. It is a question of scale. Podcasts as a share of listening has gone from 2 to 4 . That is over the last few years. It is probably growing somewhere around 25 . We are really not at the point where that kind of growth at that limited scale is going to move the needle for shares or for sort of the financials. That is where we are struggling. It is a Good Opportunity but not probably big enough to satisfy the demands of investors over the medium term. Emily we have been talking a lot about direct listings, especially with the direct listing of slack last week. If you look at spotifys momentum, they are fairly flat from where they started trading on opening day. Of course, they got to capture all of the gains from the Reference Price and the opening price. That said, in reality, shares are flat. Do you think the direct listing was a good call . Kevin is a good question, one that companies probably need to consider. We have seen slack do it, seen spotify do it. There are probably pros and cons to be made in both directions. I would not say there is a blanket statement as to whether one is better than the other. It is probably more for individual companies and boards to decide. Emily what do you think spotifys path to profit is . Is there one, with apple having a deep cash pile and the benefit of being on the iphone . Kevin that is the question. Our big concern is that spotify will ultimately prove to be a pure play on a loss leader category. If we look at the deeppocketed competitors, apple, amazon, they can operate streaming music as a benefit to their broader ecosystems and not have to generate profit from streaming music on a standalone basis. For that reason, we struggle to see a way in which the industrylevel profit will be attractive. Spot is a pure play on that industry. It is an ongoing question as to what the key driver is. The Management Team and bulls a twosidedo marketplace, high leverage promoted revenue. That is worth exploring but is unproven. I would say only time will tell. We are skeptical but obviously theres room for debate. Emily kevin, thanks so much for sharing. Good to have you. Coming up, a notable year for tech on public. What happens after . We will discuss, next. This is bloomberg. Emily this is bloomberg technology. Im emily chang. Since slack debuted above its Reference Price, it has been a calm down over the past couple days. Stocks down 7. 5 from where it closed on opening day and is not just slack that might be in the midst of a correction. Over the last three market sessions, others have been lagging behind the s p. Our next guest is a board observer in the company and has in a Venture Capital firm, has invested in stripe, medium, and other things. Good to have you. You invested at about a 1 billion valuation and you are now 15 or 20 times that, not bad. How does it feel getting to this moment when there was a point when Stuart Butterfield wanted to give all his money back to investors. Its been a wild ride with slack. Its been almost five years since we invested in the company and that was the early days of what slack actually is now. They pivoted from a Gaming Company and to the product we are now know.