Antitrust probe into facebook, looking squarely at the social networks buys. And cloud wars. A new u. S. Defense secretary, mark esper, says he will review the pentagons 10 billion cloud contract and concerns it is amazon is getting an unfair advantage. This following President Trumps concerns. But first to our top story. President trump up ripley abruptly escalated his trade war with china thursday, tweeting during the talks, the u. S. Will start on super one, putting a small additional tariff of 10 on the remaining 300 billion of goods and products coming from china into our country. This does not include the 250 billion already tariffed at 25 . This after failing to come to an agreement in recent talks in shanghai. Tech stocks including apple plunged on the news. Tariffs in may included tech goods including most of apples major products. Earlier, asked about if he is concerned about the reaction. Listen to what he had to say. Pres. Trump im not concerned at all. People are not understanding what happened. Emily to discuss this, we are joined by sarah mcgregor. Also with us, max. What does he think people dont understand . Max the theory from the Trump Administration is, number one, this is a temporary thing. This is all part of a negotiation with china. It is the art of the deal. And that i think basically Trump Supporters agree with that. The other piece of it is these American Companies can adapt. The reason you dont see apple stock tanking right now is because apple uses contract many fracturing and in the long run, they can shift manufacturing out of china if they needed. Obviously, it would be a pretty big lift for them and a bit of a nearterm disaster. Emily so, sarah, as usual, there is ambiguity on the length of time this would be imposed the president indicating it could go up or down, be short or longterm. Give us the details. Sarah later after he spoke with reporters when he announced the 10 are in a tweet said it could go well beyond 25 if he had to go there. It just creates a whole new world of uncertainty for the business community. And i think companies, like apple for instance, this is a 10 tariff that trump announced today. When they announced the 3 billion possibility, the rate this 300 billion possibility, the rate was 25 . 10 is not quite there yet. Still, this is the part of chinas imports that will hit consumers. Even a 10 tariff, if a company cannot eat that up, it will be passed onto the consumer. Everything from childrens clothes to toys, your iphone, this raises the possibility of those prices going up. Emily now, thus far, apple goods like the apple watch and air pods have not been tariffed, max. How do Companies Deal with this uncertainty . Sarah and i were talking yesterday, and she indicated it is increasingly looking like there is not going to be a shortterm resolution. Max i think you are seeing companies talking more and more about manufacturing outside of china. India, manufacturing in india or other countries would be a possibility. The other highend manufacturing ecosystem is in china right now. The other thing is they could raise prices. Part of the problem is already the iphone is kind of under pressure from consumers. Consumers have been hesitant to upgrade. The upgrade cycles are getting longer. You wonder if you start raising prices even a little bit, that could change the economics for apple. Emily sarah, how about the Trump Administration this part deciding which products to and which products to not tariff . Sarah it does seem they have come under a bit of pressure from people like tim cook. There were some apple products on previous tariff lists that were left off ultimately, that they were able to successfully lobby to get those products off. On this 300 billion, there has been a Public Comment period, and the draft list is just that, a draft list. The Trump Administration will have to come out with a finalist, and that is where the big question is right now. Im sure there is a scribble of lobbyists in washington getting the paperwork in order, trying to hit the white house and get a meeting to try to convince trump to leave their products off the list. So that will be an interesting thing to see develop over the next few weeks for this 10 tariff takes effect. Emily and before the next round of talks also starting in september. Sarah and max, thank you both. Now pinterest chairs jumping as shares jumping as much as 17 in extended trading. Reporting better than projected Revenue Growth and boosting is forecast for the year. Second quarter revenue jumped 62 , 261. 2 million, better than analysts estimated. It attributed the gains to international and u. S. Growth and to the business was positively impacted by the later timing of. Of easter. Coming up, investigating facebook. The government is exploring if facebook is buying companies to keep the competition down. That is next. This is bloomberg. Emily further details emerging about the u. S. Federal trade commissions antitrust probe into facebook. Investigators are trying to determine whether the social networks purchases of Companies Like instagram and whatsapp were done with the intent to keep him from threatening facebook. To discuss, joining us from oakland via skype, is ashkan soltani, the former cto of the ftc. Here in the studio, kurt wagner, who of course covers facebook for us. What exactly do we know about the ftcs lines of inquiry here . Kurt so they are going to be looking at all of the acquisitions facebook has made or at least some of them. There is many. There was dozens. We only know some of the big ones. Of course, instagram, whatsapp. Many other smaller acquisitions. What we are starting to here is they will be reaching out to people who were involved in those deals to try to get a sense for did facebook make these purchases, these acquisitions for the right reasons . And right now, that is really kind of a new element that has come up in the last couple hours. Emily facebook as you mentioned, they have acquired 90 companies over the last 15 years. The ftcs report of the concern about facebooks attempt to thwart the competition or buy companies that would threatened facebooks own app. I dont understand. Isnt a Company Buying another company one of the primary Reasons Companies do that . Because they will be competition, right . Ashkan right. So the ftc, as you know, launched in june this Technology Task force to investigate and look at antitrust matters, including acquisitions. One of the things to think about that group is stopped mostly from the people from mergers, pushed from the ftc to the rigors division. They will be looking at whether these acquisitions were done in a way that harms competition in the market or is anticompetitive in any way. Emily so were you there when the ftc approved the acquisition of instagram and whatsapp . Because there is some reporting the acquisition of instagram at least brought some discomfort to the commission. They were not quite comfortable with it but also did not think they could necessarily win if they challenged it. Ashkan i dont believe i was involved in that matter and i dont believe i was there during that decision. The thing to think about is a lot of the decisions or considerations are for example around the definition of the market these companies occupy. Whatsapp was a messaging or communications app, whereas facebook could have been seen as a social networking app. If you think of them as all as Data Acquisition apps for the purpose of advertising, then the analysis differs. People are coming around to the perception that it is not just about the sector you occupy, but the fact that you combine the data across the sectors to further advertising goals, to further kind of Data Collection goals. Emily now, kurt, there are some other companies in question here. For example, a company which is a company many of us may not have heard of. Facebook uses behavior tracking technology to target companies that would make good acquisitions. Tell us about that. Kurt it was an app that people would kind of download on their phone as an alternative vpn. It routed Internet Activity through facebook so facebook could see what apps were people downloading to their phone, what websites were they visiting, that kind of thing. It gives them a sense of what is popular, what is growing. It is a way to spy on the competition a little bit without spying on the competition. We have been told repeatedly this is not a surprise, that facebook used that data to figure out, what is the upandcoming app of the moment . Where should we be paying attention . And who should we potentially try to acquire . Emily ashkan, many of the people who worked at these Companies Still work at facebook. Obviously the founders of instagram and whatsapp have left, but these committees are deeply embedded in facebook and facebooks culture. What would the remedies be if the ftc determines that there was an antitrust issue here . Ashkan right. I mean, there are many remedies. I know a lot of people jumped to things like breaking up the company. Certainly the topic of a political debate in the upcoming election, the 2020 election. The thing to think about is simply breaking up the company would do little if the other people that would build the technology are still at the company and in fact could just reproduce the functionality themselves. Right . Other remedies, for example, the German Competition Authority has one of the concerns of opposition restrict facebook from sharing Data Collected between whatsapp and another of their products like instagram or Facebook Messenger app. They also restrict the tracking of information from the web. The Facebook Like buttons and others, from being shared with other apps. We talked about it in light of this facebook privacy settlement that was announced a week or two ago. But there is a lot of overlap in terms of what remedies could be pressed for. Emily meantime, the doj has opened an investigation broadly into big tech. Do we know yet or have any indication what this means for facebook . Kurt i dont think we know specifically but if you look at the digital ad market, that seems to me to be the most likely area where facebook might be brought into this. Right . You look at facebook and google and the amount of the digital ad market that they control and their size and their scale. If there was one kind of industry area where they are dominant or could be perceived as dominant, i think it would be digital advertising. I imagine that will be where they get roped into this. Emily kurt wagner and ashkan soltani, thank you both. Coming up, peter thiel targets china. Why the billionaire took investor went from praising chinas rise to trumpeting the president s trade war. That is next. Bloomberg technology livestreaming on twitter. You can check us out technology, and be sure to follow our breaking news network, tictoc, on twitter. This is bloomberg. Emily the pentagons new chief says he will look into its controversial cloud contract. Mark esper has ordered a review after President Trump endorsed criticism that amazon is being given an unfair advantage. The contract eyed as much as 10 billion. Complaints from microsoft and oracle, which was needed from the competition earlier this year. Billionaire tech investor peter thiel has been to the braided and shunned for his contrarian views from his early days on paypal to his early embrace of donald trump when his Silicon Valley peers were in favor of hillary quinton. Of hillary clinton. Now there is china, which peter thiel viewed as an economic wonder, but now he is stoking antichinese sentiment and stoking President Trumps trade war. Joining us is lizette chapman, covering the story for us. I remember doing an interview with peter thiel where he was praising the accomplishments of the Chinese Technology industry. How did we get to this . Lizette yes, thats right. It has been an evolution. Like you said, he was one of the first to recognize the huge economic power that china has unleashed over the past decade. He looked at doing a number of investments there. Investigating it for a while. But after we dug in and took a look at some of his holdings we found that he actually only placed bets on three chinese based technology startups. Emily so is this a sort of long developing theory . Lizette well, you could say that. Some could also say he missed out on all the major bets that a lot of his colleagues in other Venture Capital firms did extremely well in and made huge returns on. Jd. Com and alibaba for that matter. Depending on your point of view, it could be summer grapes, could sour grapes, or could be missed out on all these great deals, or could be a serious look at what he considers a brewing cold war between the two countries around technological edges. Emily after thiel made those controversial comments about google, which to remind reviewers he said google was doing work in china, openly questioned whether they have been infiltrated by foreign spies. The president praised those remarks and said the administration would look into googles work. President trump calling him in a tweet as a great and brilliant guy. How does thiels relationship with the president impact Silicon Valley . Impact u. S. Companies . Lizette right. Well, he definitely has trumps ear. He has installed a number of his former coworkers and in the top positions in the administration, so those ties definitely dont hurt. He also made some huge bets on companies, including palantir technologies, which i know we talked about before. And the oculus founders vrs digital surveillance company, and spacex, and all of those large contracts with the u. S. Government. Whether they are larger because of trump and thiels relationship or not is anyones opinion. Emily and palantir is a did Data Intelligence firm that works closely with the u. S. Government. There is technology that can be tracked across the u. S. And mexico border. Tell us about that. Lizette correct. Both of them, like spacex, have large contracts with branches across government, the department of defense. And as they have evolved in technology has evolved, the contracts have also gotten larger. At the same time, thiels has also gotten larger within the Trump Administration, with confirming mark esper just hours ago. Emily just a reminder thiel is on the board of facebook, of which google is a huge competitor to facebook, but you wonder if he has any influence on the president when it comes to these antitrust investigations, lawmakers scrutiny of big tech companies, which always include facebook and google. Lizette that is a great question. What we do know is that shortly after peter thiel made these unsubstantiated claims about google possibly being infiltrated by chinese spies, trump did tweet that out and urged an investigation, which came forth the following day with a statement from the white house saying they had found no evidence. Whether there is another story, a followup story after that remains to be seen. Emily Steve Mnuchin echoed that statement from the white house. Lizette chapman, thank you so much. Great indepth story out by you about peter thiel. Finally this hour, you may think of diamonds as a girls best friend, but what you may not know is they are also considered the computer chips best friend, a viable and even superior alternative to silicon. In Silicon Valley, they are being used to fuel advances in 5g, satellites, quantum computing. I recently visited a lab that grows diamonds and how they are made, what they are for, and of course tried a few on. It sparkles. It shines, and it is oneofakind. But this diamond is not the product of mother nature. Instead, it comes from a lab in a process that is shaking up the 80 billion diamond industry. How long does it take from start to finish to grow a two carat diamond . It takes a couple weeks and a couple more weeks to finish it and do a polished. Emily the same characteristics income can make up as mined stones without the controversy of their origin. You start with this foundational piece. Once it is in the reactor, carbon atoms start to come down one at a time and connect to the diamond below it. Atom by atom, a growing diamond. All of the reactors we created inhouse. That is where all the magic happens. Emily martin and his team at Diamond Foundry in San Francisco have been making these gems. Silicon technology, and we recognized the technologies we use can be applied to diamonds of high quality in ways that previously were impossible. Emily but they are not the only ones. There is new Diamond Technology in st. Petersburg. Technologies in singapore. And even in the centuries old diamond business getting in on the act. In 2018, it launched a Fashion Jewelry retailer called lightbox jewelry, targeting younger consumers, selling them for 800 a carat. 1 10 of an actual gem. Questions remain how well manmade diamonds will hold their value. Probably will produce 35 cubits of natural diamonds this year. You look at the global output of manmade diamonds produced for jewelry, it is probably 5 million carats. But it was well under one million carats just a few years back. Emily last year a major win for producers of manmade diamonds when the federal trade commission amended its jewelry guidelines, clarifying a diamond is a diamond, regardless of its origin. Currently, manmade diamonds account for 1 of the 14 billion global rough diamond market. That number is expected to grow to 7. 5 mined as early as 2020. Much of that growth is in the luxury jewelry market. But the real money opportunity to use with a developed in this lab to fuel the future of Silicon Valley. We now have the ability to develop the first diamond wafer. A lot of technological applications, for digital networks, 5g network