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The Biggest Story Heading Into CES 2019 Is … China

As the annual Consumer Electronics Show kicks off this week in Las Vegas, the buzz might be more about international trade relations than technology

Getty Images/Ringer illustration

The Consumer Electronics Show begins in Las Vegas on Tuesday, a historically nonpolitical trade convention where the real world is almost entirely forgotten within halls full of smart dishwashers and “fully immersive” toilet experiences. CES is typically something of a tech free-for-all, an inflated version of what could be. The event is part forecasting and part dream fulfillment—some of the products at the show will end up in consumers’ homes, but many of the more fanciful ones will never hit shelves. The excessiveness is part of the fun, so much so that it’s easy to forget that the success of the soon-coming tech on display could depend on comparatively banal international relationships.

In part, that’s because something happened last week that hadn’t for 16 years: Apple was forced to issue a warning prior to its earnings call regarding its fiscal performance. After listing new approximations for this past quarter, Apple CEO Tim Cook explained that the company’s quarterly revenue would be lower than it originally estimated. The last time this happened was back in the pre-iPhone days, but the subsequent mobile revolution kick-started by the company did more than turn things around; it inspired an economy. But this past quarter, weak iPhone sales over the holiday season hurt Apple’s earnings projections; to be more specific, the slumping iPhone market in China was the culprit. Cook’s seemingly benign statement said as much in no uncertain terms: “Lower-than-anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline.”

Silicon Valley has typically been a bastion of liberalism—though sometimes prone to espousing libertarian agendas, it’s generally left-leaning. But the past year has been all about accepting the compromising alliances of the technology industry. From the Cambridge Analytica scandal to the revelation Sheryl Sandberg wanted to research Facebook critic George Soros, Facebook weathered a storm of criticism in 2018. Twitter’s failure to quash misinformation while allowing accounts like Alex Jones’s to spew hate speech and fake news (until recently at least) were publicly derided. Google was forced to step in front of Congress and defend its role in the 2016 election, and it also planned (then killed) a censorship-enabling search project that whistleblowers said would help the Chinese government oppress its people. Silicon Valley is inexorably intertwined with politics, and now that fact is impossible to ignore. The criticisms of these companies and their industry are loud, but so far systemic change has been nonexistent to slow at best.

But now politics could spur tech companies to speak against an administration many of them have waffled on. President Trump’s 25 percent border tax on imported Chinese goods and China’s retaliatory 25 percent tax on U.S. goods are creating tensions for businesses and consumers in both countries. That technology companies are concerned about their revenues is not surprising, but with the start of U.S.-China trade talks coinciding with CES week, the world’s biggest tech show has a slightly different context this year. Apple is not the only one sounding the alarms: Gary Shapiro, CEO of CES organizers Consumer Technology Association, has spoken out against Trump’s tariff agenda. “Trump is just wrong when he says that the Chinese companies are paying,” Shapiro said in a recent interview. “No, the American consumer is paying.” In November it was reported that American businesses’ tariff payments surged more than 50 percent year over year from September 2017 to September 2018, with tariffs from China being a significant piece of the increase. A number of companies also reported that they were forced to raise prices as a result of the tariffs.

As in years past, CES will host a hall entirely focused on Chinese innovation—but this year, there’s a 20 percent dip in Chinese companies represented at the show. This absence won’t go unnoticed. “Attending a show like CES is expensive, and with Trump’s rhetoric towards Chinese technology, companies in China are rethinking their strategy of investing in the U.S.,” Shaun Rein, a managing director of China Market Research Group recently told South China Morning Post.

Of course, Apple doesn’t attend CES; its Worldwide Developers Conference and product launch events are basically its own versions. But CES booth after CES booth in Vegas will feature Apple-compatible products. In effect, the company is omnipresent there. Apple’s poor earnings performance and its CEO’s quiet-yet-loaded statement have cast a shadow over the event and over the thousands of companies that have staked their success on the company. Beyond Apple’s problems, the entire industry’s struggles over the Chinese tariffs are at the forefront of everyone’s mind right now. CES is usually an escape from the world (or at least a projection of what it could become), but this year, as international trade relations loom large, it simply can’t forget reality.