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Anderson Cooper 360 Degrees

Tariffs and Smokescreens; Interview with Rep. Jim Himes (D-CT); Trump DOJ Appeals Finding of Probable Cause for Contempt in Deportation Flights Case; Stocks Drop Further After Fed Chair Warns of Higher Inflation and Slower Growth From Trump Tariffs; DHS Cuts $2.7 Million in Harvard Grants, After Billions in Fed Funds Frozen, as IRS Plans to Revoke Harvard's Tax-exempt Status; Third Pentagon Appointee Placed on Administrative Leave. Aired 8-9p ET

Aired April 16, 2025 - 20:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KATE BOLDUAN, CNN HOST: ... told 911 dispatchers that Shapiro needed to stop having his friends killed and that, "Our people have been put through too much by that monster."

The D.A. is now looking at antisemitism as a possible motive here. Balmer has so far been charged with attempted homicide, aggravated arson and terrorism. Much more to come on that.

Thank you so much for joining us. I'm Kate Bolduan, AC360 starts right now.

[20:00:32]

JOHN BERMAN, CNN HOST: Tonight on 360, the Fed Chairman weighs in on the President's tariffs. Markets tumble and the White House says -- hey, look over there.

Also tonight, the President promised to let RFK, Jr. go wild on health. While now CNN has learned how wild the White House is planning to go when it comes to cutting billions of dollars from his Cabinet Department.

And later, a new escalation of the President's war with Harvard. Now, the IRS is getting involved.

Good evening, John Berman here in for Anderson. And we begin tonight with the one thing the administration does not want to talk about, as opposed to the many that it does. The Chairman of the Federal Reserve, a Trump appointee with no obvious ax to grind, sent a chill through the market, declaring there is a strong likelihood of higher prices and higher unemployment due to the President's tariffs.

Now, this is big news and unwelcome, no doubt, for the White House, not to mention the economy and your 401(k). But it was news the White House was not talking much about today either before, during or after financial markets took another dive.

(BEGIN VIDEO CLIP) KAROLINE LEAVITT, WHITE HOUSE PRESS SECRETARY: I think it's atrocious that you have Democrats in Congress on Capitol Hill who swear an oath to protect their constituents and to serve them in Washington, D.C., spending more time defending illegal immigrant gang members than their own constituents and law abiding American citizens.

PAM BONDI, U.S. ATTORNEY GENERAL: The state of Maine is discriminating against women by failing to protect women in women's sports.

THOMAS HOMAN, WHITE HOUSE BORDER ADVISER: He wasn't abducted. He's a MS-13 gang member classified as a terrorist that was removed from this country.

BONDI: These are boys in a girls locker room. One is too many.

(END VIDEO CLIP)

BERMAN: Now, that's a portion of what the administration was focusing on today. Subjects that play to the President's base and to some extent, he posed well on, such as the transgender issue.

On the other hand, he's underwater on his handling of the economy. And on that front, polling is almost certainly the least of his problems, especially when the Federal Reserve Chairman has this to say about the tariffs.

(BEGIN VIDEO CLIP)

JEROME POWELL, U.S. FEDERAL RESERVE CHAIRMAN: Inflation is likely to go up as tariffs find their way in some part of those tariffs come to the -- come to be paid by the by the public.

Tariffs are highly likely to generate at least a temporary rise in inflation. The inflationary effects could also be more persistent.

(END VIDEO CLIP)

BERMAN: That and news that chipmaker, NVIDIA just took a five plus billion dollar hit from the trade war with China, was more than enough to send investors racing to sell. Markets ended the day down anywhere from 1.7 to three percent.

Now, Chairman Powell said, what we played for you between 1:30 and 1:45 this afternoon, which is right when markets began to tumble. That's the S&P 500 you're looking at there. The big down downturn started at 1:30 on the dot. Within an hour, the White House began alerting the media to a 4:30 press conference with what was billed as a special guest who turned out to be the mother of a woman murdered by an undocumented migrant.

Now, this was devastating. What she has endured is unimaginable. Period. A short time later, when the administration finally had some good news to report on tariffs, the President went online with this, "A great honor to have just met with the Japanese delegation on trade. Big progress!" Now, for more with what happened in the markets and the economy, the Fed chairman is joined by CNN's Richard Quest. Richard, great to see you. The Fed chair used some new language today. He seemed to ratchet this up a bit. What was he saying and why were the markets so concerned about it?

RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": He spoke the truth that dare not speak its name as they say. He said for the first time that the public is going to pay the price. We've all known this and been saying it, but now the Fed chair is saying it. He described what he called a challenging scenario where the dual mandate, full employment and price stability by law are going to be in conflict. Intention is how he put it. What does that mean?

It means stagflation. It means the economy is going to slow down. Jobs are going to be lost. So unemployment is going to rise and inflation is going to rise because of the of the tariffs and other aspects. And so, the Fed chair -- look he's not a canary in the mine. He's not a warning. He's a man walking in front with a red flag like in the old days in front of a car warning us that this is happening. This is happening.

BERMAN: Now, it's unclear whether or not the President could actually remove the Fed chair. That's a whole separate issue. But if Jerome Powell were to go, what would it mean and how would the markets react?

QUEST: Oh, they would collapse. I mean, I mean, he can't get rid of him, as best we know. But if Jerome Powell was in some shape or form to be rubbish, nonsense and generally ridiculed by the administration, much more to the point where other members of the governing council or the board of governors, it would be disastrous for this country and for the economy, absolutely disastrous.

[20:05:22]

BERMAN: All right, Richard Quest, don't go far. We're going to come back to you in just a moment.

Let's now dig deeper on how the administration is mostly not talking about this. For that, were joined by CNN chief White House correspondent and anchor of "The Source," Kaitlan Collins.

Kaitlan, give viewers a timeline of the day, what the Trump administration focused on and not how calculated of a strategy is this?

KAITLAN COLLINS, CNN ANCHOR AND CHIEF WHITE HOUSE CORRESPONDENT: It's not clear that it is completely calculated. These are all obviously things that the White House is wanting to talk about when it comes to the legal fight that they are now having with having with the governor of Maine.

Obviously, with that moment this afternoon inside the White House press briefing, which was not initially scheduled on the President's public schedule and then was added later on, and then the President himself just appeared at a prayer dinner at the White House. He did not address what we saw happening today throughout the stock market, obviously, with those comments from the Fed Chair, Jay Powell, quite notable, John, given it was -- he was essentially arguing that the policies that we are seeing being carried out by the President of the United States.

One, that the tariffs were much larger than they were expecting over the Federal Reserve for these tariffs to look like. And as they were kind of, you know, guesstimating what this was going to -- this policy was going to be. And then secondly, as he was saying, you know, this is going to push prices up, he believes.

He was also making clear that the Federal Reserve is not coming to the rescue yet, that they are still in wait and see mode to see this, because these policies with tariffs have been so up and down and implemented and paused and rescinded and then put back on.

And so, he's essentially arguing that they are waiting to see what this looks like. And he talked about how challenging it is for what the Federal Reserve's ultimate role here is, which is to keep inflation down and to keep the labor market robust. And so, that is a real question here to see how President Trump responds to that.

We have not heard from him yet, John, but he is someone who very firmly believes that they should cut interest rates and that he should have a say in that argument. And he has made that quite clear over the last several weeks as he has rolled out this tariff policy. And so, that is still a question for the White House.

And as for that meeting with the Japanese delegation that happened, that's the dinner the President was at just a few moments ago. As for that meeting, though, with the Japanese delegation, the President argued that they were making big progress as they are the, you know, one of the first nations to come here in person and directly negotiate these tariffs.

But it's not clear yet if anything was agreed to in that meeting or what exactly that looks like, John. And obviously, it's something that everyone is watching incredibly closely as they're seeing how China and President Xi Jinping is navigating this on his tour, as he's been meeting with leaders in Vietnam over the last several days.

BERMAN: Yes, it's one thing to say there's progress. It's another thing to tell people what that progress actually is.

Kaitlan Collins, thank you very much. We're going to see you at the top of the hour on "The Source."

And though the administration did seem to use the deportation fight a little bit to at least focus on a different subject from the market, there was both news on it today and breaking news tonight.

Just moments ago, the Trump administration appealed today's blockbuster ruling by Federal Judge James Boasberg that, "Probable cause exists to hold administration officials in criminal contempt of court for violating his orders." This stems from the case last month, when the administration sent three planes of migrants to that notorious prison in El Salvador. Judge Boasberg ordered those flights back to the country, which did not happen. Explaining his decision today, the judge said he has given the government ample opportunities to rectify or explain their action but, "None of their responses has been satisfactory."

Here to talk about that and the economy, too. Congressman Jim Himes, Democrat from Connecticut, ranking member on the House Intelligence Committee. I want to start with the economy first, if I can. You know, the President is someone who very successfully, often redirects attention from one thing to another. Do you get the sense he'd like to be focused on almost anything right now, besides the tariffs and the economy?

REP. JIM HIMES (D-CT): Yes of course, I mean, it's a really interesting moment, John, right. Because and weirdly, the deportation cases and the economy and the markets are linked, right. Because as we saw when the Salvadoran President was in the Oval Office, Stephen Miller and the President and Marco Rubio will lie and lie and lie about Supreme Court rulings claiming that the Supreme Court ruled in their favor. They will lie about the fact that this Abrego Garcia guy is clearly a terrorist, despite not providing any evidence to that fact at all.

And look, when the President and Miller and Rubio lie, MAGA folks believe them. Some people are outraged. Other folks are confused. You know, who you can't lie to, you cannot lie to the markets. And the markets are delivering a brutal verdict on the lie that this tariff program is going to reindustrialize America. The lie that it's not going to be inflationary.

And so, it's interesting, you know, there's two people right now, two institutions that Donald Trump cannot cow. The markets, which are delivering just a brutal verdict. And of course, the courts who you were just talking about, who are, I think, on the very verge of starting contempt hearings against an administration that has truly shown contempt for the rule of law.

[20:10:12]

BERMAN: And get to the course in just one second. And the idea of contempt, which you've talked about actually quite a bit over the last month. But first, you know, Jerome Powell said what he said about tariffs and fear of unemployment and that people will feel the impact of those prices and take responsibility for. What's your view on that?

HIMES: Well, it's a scary moment, right? I mean, I started my political career in the ashes of the 2007-2008 financial meltdown, where the Federal Reserve was a big part of rescuing the economy. During the COVID pandemic, the Federal Reserve and the tools that they have was a big part of rescuing the economy. What you just heard the Fed chair, who doesn't have a political bone in his body by design and by job description, saying, I probably can't fix the combination of inflation and recession that I don't know if he said likely, but he certainly said that it was a possibility And when you have the Federal Reserve saying, I may not be able to fix that, you of course have precisely what you had today, which is a stomach churning 700-point drop in the stock market.

BERMAN: Now, on the issue before Judge Boasberg and who said he has probable cause to institute contempt hearings here? You were on this program a month ago discussing this case, and you were asked, do you think that the U.S. is on the brink of a constitutional crisis? You responded, I do. Now, that was a month ago. How about where we are today?

HIMES: Yes, you know, John, I get asked that question five times a day and I try to fend it off because we have an obviously lawless President who daily shows utter disdain for the constitutional oath, by the way, even so, I had to sort of chuckle when the press secretary in that segment, you just land said that Chris Van Hollen and we all take an oath to serve our constituents.

Man, talk about a Freudian error. I've taken that oath a whole bunch of times. It says nothing about constituents. It is an oath to support and defend the Constitution. And so, I mean, I thought that was an interesting Freudian slip that the press secretary doesn't really know who we are taking and what we are taking an oath to.

But look, you know, there's no magic button that we press when there is a constitutional crisis. So what I think is really important right now is you have two federal judges saying you guys are in big trouble. The judge in Maryland on the Abrego Garcia case, and of course, Judge Boasberg, who are all that is standing between the moment were in right now, where the administration is showing disdain for the rule of law. And what I would certainly define as an absolute constitutional crisis, that moment when the President says, as Andrew Jackson said back in 1834, the courts have made their ruling now, let them enforce it.

That is the moment where, you know, you might as well just say we are no longer living in a system of checks or balances or democracy frankly.

BERMAN: Quickly, I want to ask you about some breaking news. "The New York Times" just reported this, and I want to quote it here. "Israel had planned to strike Iranian nuclear sites as soon as next month, but was waved off by President Trump in recent weeks in favor of negotiating a deal with Tehran to limit its nuclear program, according to administration officials and others briefed on the discussions."

Also in the article, a National Security council spokesperson told "The Times," "President Trump has been clear, Iran cannot have nuclear weapons and all options remain on the table."

Now, I know you as a ranking member of the Intelligence Committee, there are some things you can't tell me. But what is your reaction to this reporting?

HIMES: Yes, I'm not one bit surprised by it, John. You know, the Israelis and this prime minister in particular, Prime Minister Netanyahu has floated this before with other Presidents. Other Presidents have stepped in and said, not a good idea, I have no doubt in my mind. And I managed to -- I spent about an hour and a half with the Prime Minister, a month ago or so.

I have very little doubt in my mind. But this Prime Minister has decided that he's going to attack Iran. He looks at Iran and sees a degraded air defenses. He sees a weakened country, and he sees his own legacy as wrapped up in this. His challenge, of course, is getting Donald Trump to sign up to assisting. And there's two big things that I think push back against that. One, I don't have a lot of good things to say about Donald Trump, but I do think he has a natural aversion to wars and in particular, wars in the Middle East

And oh, by the way, we've been talking about how disastrous the economy is and is likely to get if you layer in a massive spike in global oil prices on top of these tariffs, on top of the market decline. I mean, I don't even know if the word recession is a big enough or an all-encompassing enough word to describe what would happen to the American economy if there was a shooting war in the Middle East right now.

BERMAN: Congressman Himes, we do appreciate your time tonight on many subjects. Thank you very much.

More now on today's developments on court challenges over deportations with a CNN senior legal analyst, Elie Honig, he's a former federal prosecutor, as is our next guest, Alyse Adamson, as well as former Federal Judge John E. Jones III.

And Judge Jones, I do want to start with you on this. Judge Boasberg in this, you know, 40-plus page ruling. What did you think of what he had to say and how he laid it out?

[20:15:12]

JOHN E. JONES III, FORMER FEDERAL JUDGE: I thought, John, that the opinion was beautifully written. He's clearly trying to do what he should do, in my view, which is vindicate the court's authority in this particular case. He was thorough in laying out the factual panoply that led him to the finding of probable cause of contempt. And so, you know, from a former district judge -- a judge's perspective, the same rank as Judge Boasberg, I think he did what he had to do.

BERMAN: So, Elie, this was the sort of this meticulous timeline that Judge Boasberg laid out of government actions. What did you find so important about this?

ELIE HONIG, CNN SENIOR LEGAL ANALYST: So, the timeline, John, tells us to really answer to the key question, was the defiance willful or intentional on the one hand, or was it just accidental on the other? And if you read this brief, it makes an overwhelmingly strong case that it was intentional. That's the big headline here. Federal judge finds that DOJ willfully defied his order.

Let me give you two examples that jumped out at me. First of all, there is a moment on that Saturday morning, March 15th, when this all went down, when the judge contacts both parties, DOJ and the lawyers for the deportees and says we need to have a conference today. DOJ's response is, no judge, a conference today would be, "premature." And DOJ says let's do it Monday. At that very moment, DOJ is loading and rounding up these deportees, loading up the plane, getting ready to send them out. That is underhanded. That is subterfuge right there.

Second of all, the other thing that jumped out at me is while the hearing was happening again that same Saturday evening, the planes took off during the hearing. The hearing then ends. The judge says, my order is none of those people are to be deported. And after that the plane is unloaded and those people are handed over to El Salvador.

So, that's why the judge drew the dramatic, but I think, well warranted conclusion that he did.

BERMAN: And Alyse, Judge Boasberg still, even though this was a meticulous case that he laid out here, he seems to be providing a lot of off ramps to the Department of Justice here. Walk us through what the government options are and whether you think they will take advantage of any of them.

ALYSE ADAMSON, FORMER FEDERAL PROSECUTOR: That's right, John. There was a finding of probable cause of contempt of this order. But Judge Boasberg laid out in his ruling that the Department of Justice could remedy the situation by asserting custody over these individuals, because recall what DOJ has been arguing over and over again is they don't belong to us anymore. They belong to El Salvador, and that's why they can't bring them back or afford them their due process.

And Judge Boasberg is saying, you can have -- you do have a remedy here, go ahead. Give them their due process rights. Let them petition in habeas and let them be heard. Judge Boasberg even acknowledges that doesn't mean he has the power at this point to bring them back to the homeland. He's merely saying give them afford them that opportunity to plead their case.

Now, will DOJ take that off ramp? Most likely not. We're seeing a doubling and tripling down by the administration. There's a new narrative that Judge Boasberg is lawless and just hates the President. But this is a very narrow issue. This is about contempt for the court. This is about defiance. And that's what we should be focused on. And there's a very easy off ramp here for the government.

BERMAN: Before they're taking any off ramps they're appealing this, Judge Jones. So, walk us through how this will work, what the steps are and what Judge Boasberg's options are in roll in all this now.

JONES III: Well, I agree with my co-panelists that it is very unlikely. You know past is prologue. They're not going to take this off ramp. And interestingly enough they've appealed it. And my view is that an appellate court doesn't have jurisdiction because there hasn't been final an order of final sanctions in this case. They may try to do it on a legal basis that Judge Boasberg doesn't have jurisdiction. I think he did.

Here's what concerns me, John. I think, you know, ultimately, what they're going to do is play a game where they get it on the emergency docket at the supreme court again, and the Supreme Court is going to have to uphold the integrity of the lower courts in the federal system, and they're going to have to be more direct than they were. For example, in the Garcia case, where, you know, it was either effectuate, you know, or facilitate -- and we're playing word games.

I mean, at some point, our Supreme Court is going to have to recognize that, that they're, you know, smacking around or attempting to smack around these district court judges and do something about it. Following the law, of course, in following the facts.

BERMAN: So, Elie, one of the things that Judge Boasberg laid out is if the DOJ, if the Department of Justice doesn't take any of these off ramps, one of the things he could ultimately do is bring in an outside lawyer, a special prosecutor. I know that word means a lot of different things to a lot of people, but a prosecutor to go after them on this, how would that work exactly?

HONIG: So ordinarily, a contempt case would go over to the Justice Department. But of course, they're the party here. This is the very, very narrow exception where a court can actually bring in some outsider. It's so rare, John, that there's no specific set of rules. It happens so rarely.

But I think the two things that certainly judge Boasberg would look for, first of all, a person who's been a prosecutor, a former prosecutor who knows what they're doing, and then somebody who will at least have the appearance of impartiality, of being nonpolitical.

[20:20:40]

BERMAN: And, Alyse, if they get a conviction, can't the President just pardon people and throw it out? Can it stick?

ADAMSON: Yes, I mean, I think that's the question a lot of us were asking ourselves when this order came out today, which is to what end? I mean, first you have to have a criminal trial. They have to be convicted. There's really no precedence for this. They want to hold officials in contempt, and they've never put an official in jail, maybe for a few hours. I think there's only one example of that. But you're absolutely right. The President could potentially just pardon these individuals.

One of the other things I was talking to some other practitioners about today was whether he could even give presumptive pardons. I mean, the fact that were even having this discussion is alarming. And one of the reasons that when these broad pardons were issued at the beginning of Donald Trump's presidency, we warned it was a slippery slope.

So, I think we're going to have to see. I'm hoping that DOJ will want some legitimacy here and just take it all up to the Supreme Court. But at this point, we don't really know.

BERMAN: Look, this is obviously a whole bunch of different issues at play at the same time here. Right now, we do have this record from Judge Boasberg, which in and of itself is interesting and worthy of discussion. I really thank you all for being here. Judge Jones, Elie Honig and Alyse Adamson, thank you.

Next, what CNN has learned about these huge proposed cuts that Robert F. Kennedy's Health and Human Services Department, including to the CDC and other disease prevention efforts.

Also, more on the markets, your investments and what the President's tariffs could do more than just take that down the road, what they could -- what the President's tariffs could do to all of that. Stay with us.

(COMMERCIAL BREAK)

[20:26:43]

BERMAN: So, breaking news tonight. A potentially huge cuts to the key federal department being run by Robert Kennedy, Jr. CNN has learned that the Trump administration is prepared to slash a whopping $40 billion from the Department of Health and Human Services. That's about a third of its discretionary budget.

Let's get right to CNN medical reporter Meg Tirrell for the latest on this. Meg, what are you learning about these plans for cuts to health agencies?

MEG TIRRELL, CNN MEDICAL REPORTER: Yes, John, I mean, this is the first real comprehensive view of what the HHS might look like under this massive reorganization we've been hearing about. We, of course, know that they've cut 20,000 workers, half of them voluntarily, half in a massive reduction in force. That's about 25 percent of their workforce. But really, we hadn't seen what that was going to look like in the end.

Now, if this gets adopted, this of course, right now is in the proposal phase. We would see 40 percent cuts to the budgets at CDC and the National Institutes of Health for example. Entire units within those divisions would be cut. So, at CDC we're talking about their Global Health Center. We're talking about chronic disease prevention, domestic HIV and AIDS prevention. Some major things like gun violence and injury prevention.

At the NIH, they're talking about consolidating 27 research centers and institutes down to eight, John. So, these are massive changes. We, of course, have to see if this becomes final. But this really gives us a more comprehensive look than we've seen so far into what they're suggesting for reorganizing HHS under Robert F. Kennedy Jr..

BERMAN: Big changes, now, I also understand you've got some reporting on an HHS official who's leaving the agency because he says censorship of his findings. What more can you tell us about that?

TIRRELL: Yes, so we know that Robert F. Kennedy Jr. has talked a lot about ultra-processed foods as a big part of this make America wealthy again platform. While the top NIH researcher on nutrition, Dr. Kevin Hall, has been running some of the world's only randomized controlled studies on this topic. And of course, he expected perhaps he was going to get more support under this new administration.

Well, we learned today that he has actually taken early retirement. He posted on social media that he experienced, "Censorship in the reporting of his research because of agency concerns that it did not appear to fully support preconceived narratives of his agency's leadership about ultra-processed food addiction."

So, John, here he is leaving the agency. We heard from HHS just minutes before we came on who called these false claims, but this was over a paper. He said -- Dr. Kevin Hall said in a letter to leaders that we obtained really showed that they didn't see addiction brain centers light up when people ate ultra-processed foods. And so, that seemed counter to what the administration may be trying to paint here and he is calling that censorship.

BERMAN: Interesting development there. Meg Tirrell, thank you very much.

Returning to our top story today. Today's market moving warnings from the Fed Chair Powell about the potential impact of the President's on again, off again tariffs.

Richard Quest is back with us. Also with us, Heather Boushey who served on the Biden administration's Council of Economic Advisors.

And Heather, let me just start with you. When you hear the Fed chair today, concede that a portion of the burden of tariffs is going to be paid by the public, how surprising. But also, how important is that statement?

HEATHER BOUSHEY, HARVARD KENNEDY SCHOOL, SENIOR RESEARCH FELLOW: Well, it's very important, but let's be frank, it's actually not that surprising in the sense that we've all seen the chaotic implementation of these tariffs. They are much larger than many folks expected them to be. And because they're so -- they're so broad, they don't seem to have any strategic goal behind them in terms of specific industries we're trying to develop here in the United States or other plans for how we're going to develop that manufacturing base.

You know, it is clear that it will lead to higher prices for things coming into the country without a real plan to replace those or to actually create good jobs across. And that's what the fed was talking about. The costs look like they're going to be high. And it looks like it will actually slow growth. And of course that puts the federal reserve in a bind, as well as putting families in a bind who may not see good jobs, but are likely to see higher costs.

BERMAN: Yeah. And the fact that the Fed chair admitted that it puts him in a bind, I think is what probably chilled the markets more than anything today. Richard, now let's talk about China because U.S. is in a trade war with China right now.

RICHARD QUEST, CNN BUSINESS EDITOR AT LARGE: Oh, but, can we not -- this is a trade war. Let's not debate that, whether we are or we're not. We're in a trade war. BERMAN: So a person familiar with the Chinese government's thinking, according to CNN's reporting here, is that he says China is open to negotiations with the United States but it's got to be based on respect. We've been hearing this for days now. Do you think that they really want negotiations? And how likely do you think negotiations are?

QUEST: I think, of course, they want negotiations. Absolutely. They don't want this anymore than anybody else does. They're horrified that it has happened and they are perfectly willing to address some of the issues that the Trump administration is putting forward. But let me read you one quote if I may, from this morning's China Daily. This is an editorial in the daily, the China, basically the government mouthpiece. "The problem is the U.S. has been living beyond its means for decades. It has borrowed money in order to have a higher standard of living than it is entitled to based on U.S. productivity."

I would say there's a large number of people in the world who agree with that exact assessment. And so, the Chinese very strategically have attacked where they know it's going to hurt most based on that.

BERMAN: Yeah. Look, it appears that China has operated on a playbook here.

QUEST: Yes.

BERMAN: While the United States may be behaving somewhat erratically, at least so far. Heather, the same source that talked to the CNN about China, also said that China has a designated point person to come talk to the United States. But Beijing is unclear about who the right contact is on the U.S. side. If the president himself wants to be the negotiator, is that compatible with how China works?

BOUSHEY: Well, here's the thing. Usually when you make a big bold step in economic policy, there's a clear plan behind it and your team is aligned. And we've all seen, the whole world has seen, that this policy, or if you can call to policy, that the Trump -- that President Trump has put forward has been chaotically implemented. It has changed day by day. And it's also clear that many of his advisors haven't been given advance notice of actually what the policy is.

It makes it very difficult to figure out how you are supposed to negotiate with him. But, on the deeper level, it should make all of us as Americans very concerned about what is the plan? How will this benefit American communities? How will this support industries that can be competitive and thrive across the country that can offer those good jobs? Where is the plan for that? So, it's important for these negotiations with China, which clearly does seem to have a plan to deal with the tariffs.

That's been clear as well that they were prepared for this and have taken clear action, but it really does show the emptiness of the president's economic agenda.

BERMAN: So Richard, Nvidia --

QUEST: Yeah.

BERMAN: The U.S. A.I. chip maker took a $5.5 billion hit today because of new restrictions put on place on exports to China. Is this the type of thing that we're going to see more of? And is there some threshold where this starts to happen where it really gets ugly for U.S. companies?

QUEST: Oh, it's happening now. I mean, look at the Boeing, the decision that the Chinese did that Chinese Airlines won't take Boeing planes. That's hitting Boeing. The Nvidia one is interesting because there is solid reason why they don't want the H20 chip to be sent over to China. But to Heather's point, which I think is crucial, if you felt this was part of a strategy, not an ad hoc knee-jerk solution to something, you might understand it more.

But the market is not, because Nvidia has been beaten up on 1,001 different reasons and now this comes along, and therefore, it's very hard to see the overarching architecture, if you will, of the strategy, mainly because most people don't think there is one.

BERMAN: It changes pretty regularly. Richard Quest, Heather Boushey, thank you so much for being with us. Ahead, more breaking news tonight and the extraordinary act of retaliation the Trump administration is planning to take against Harvard University after the school refused his demands. Plus, a live report from a factory in China that's already feeling the brunt of this brewing trade war.

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[20:39:22]

BERMAN: So more breaking news tonight. We just learned that the Department of Homeland Security has canceled $2.7 million in grants to Harvard University. That's on top of the more than $2 billion in other federal funds frozen this week. Also, tonight's sources tell CNN that the IRS is making plans for what would appear to be an extraordinary act of retaliation against Harvard, rescinding its tax-exempt status after the Ivy League University refused policy changes demanded by the Trump administration.

This comes a day after the president posted this online. "Perhaps Harvard should lose its tax-exempt status and be taxed as a political entity if it keeps pushing political, ideological and terrorist- inspired supporting sickness."

[20:40:00]

Remember, tax-exempt status is totally contingent on acting in the public interest. He continued to attack Harvard today posting, "Harvard is a joke, teaches hate and stupidity, and should no longer receive federal funds."With us now is Harvard University Government Professor Steven Levitsky. He is the bestselling co-author of "How Democracies Die" and more recently, "Tyranny of The Minority: Why American Democracy Reached the Breaking Point."

So professor, what's your reaction to Harvard potentially losing its tax-exempt status and what kind of impact could that have?

STEVEN LEVITSKY, PROFESSOR OF GOVERNMENT, HARVARD UNIVERSITY: Well, look, I think we need to step back and see the bigger picture. This is part of an authoritarian assault against our country's institutions. And it's not just Harvard, it's not just universities. It is an assault on, on the media, on law firms, on critics of the Trump administration on both sides of the aisle. This is what authoritarians do. In democracies, universities are not attacked by the government. It's only in authoritarian regimes that governments weaponize the state and deploy them to punish those who they disagree with. This is an unprecedented authoritarian assault.

BERMAN: What do you think happens if Harvard continues to fight back?

LEVITSKY: Harvard has to fight back because if we want to continue living in a free society, we need to protect academic freedom. What the government was demanding to do was that -- was to allow the federal government to dictate what a private university teaches, who a private university hires, how we discipline our students, how we admit our students. That is unprecedented and completely unacceptable in any kind of a democratic society. So, we cannot accept those kinds of (inaudible).

We cannot allow the federal government to dictate what we teach, what we research, what we discuss, and still be an independent university. We have to fight back. There's no choice.

BERMAN: The question is, can you negotiate? Secretary of Education Linda McMahon said she is open to negotiations. Is that something that you think would be a good idea? What would you even negotiate on?

LEVITSKY: I wouldn't be the one negotiating. That's --

BERMAN: I mean, what would the university --

(CROSSTALK)

BERMAN: I mean in theory -- in theory, would you support negotiation and what do you think would even be the subject of that negotiation?

LEVITSKY: What I think is that universities, and this is beginning to happen, need to get together and act collectively to push back against this assault. It should not be the case that the federal government makes demands given -- about what we teach, the content of what we teach, how we hire, who we hire. This is not the business of the federal government. We are a private university. This is authoritarian behavior by this government, and it has to stop. I don't think we should be negotiating those kinds of demands.

BERMAN: You've written about this extensively, not just in the United States, but all around the world.

LEVITSKY: Yeah.

BERMAN: What happens when universities fight back? LEVITSKY: A variety of things. Sometimes universities win, sometimes universities lose. This is going to be a long struggle. We just elected this government. This is the most authoritarian government in modern U.S. history and perhaps entire U.S. history. And this is going to be a battle, not just for universities. We are talking about private enterprises, businesses, churches, NGOs, foundations, law firms, all across our civil society. Those who are on the other side of the aisle, those who criticize the government, investigate the government, challenge the government are being attacked by weaponized state agencies.

The outcome, I don't know. But if civil society actually gets up off the sidelines and begins to push back, we have a chance to stop Trump in his tracks. There are many, many avenues to stop the administration. One thing that's very important to point out is, arguably, everything that Trump administration is doing to Harvard right now is illegal. So not only is it authoritarian, it's illegal. So, we need to push back in the courts.

BERMAN: You do know that this is a fight that the administration is eager to have, maybe not even just on its merits, but because of the politics surrounding that. They think this is just good politics.

LEVITSKY: It's authoritarian politics, John. It's authoritarian politics. I'm sure it's a fight that they're eager to have because authoritarians of the left, of the center, of the right always go after universities. They go after universities because universities are centers of dissent and they're often influential centers of dissent. Autocrats don't like opposition. So of course, they want to go after us. Whether it's good politics or not is irrelevant. It's beside the point. What's most important is that we are living an authoritarian assault on this country's institutions, and we need to stand up.

[20:45:00]

BERMAN: The stakes are high, maybe even for many institutions beyond Harvard, as you say. Steven Levitsky, Government Professor of Harvard, we appreciate your time tonight. Thank you very much. Next --

LEVITSKY: Thanks for having me.

BERMAN: Inside a huge Chinese factory where exporters are already feeling the sting of President Trump's sweeping tariffs. Later, new questions about whether Defense Secretary Hegseth is ordering what one source tells us is a purge at the Pentagon. Stay with us.

(COMMERCIAL BREAK)

[20:50:00]

BERMAN: We've been talking tonight about different facets of and potential pain points from the president's tariff policy. We saw some of the impact today with stocks tumbling on Fed Chair Jerome Powell's warning about tariff related inflation and slower growth, and some of that slowdown is already underway as U.S. retailers cancel orders of Chinese-made products. CNN International Correspondent Marc Stewart has that story.

(BEGIN VIDEOTAPE)

MARC STEWART, CNN INTERNATIONAL CORRESPONDENT (voice-over): It's Christmas every day at this factory in eastern China, but the holiday cheer has soured since the start of President Trump's trade war.

STEWART: And this is all going to the U.S.

STEWART (voice-over): From Christmas signs to Santas, holiday decorations made here sell for just a few dollars in the U.S. But with tariffs, the prices are so steep, it won't be worth it for American retailers to buy them.

STEWART: How much money have you lost because of canceled business?

RON HONGYAN, BUSINESS OWNER (through translator): About more than 1 million yuan.

STEWART (voice-over): That's about $135,000. From the factory floor to her showroom, Ron Hongyan says she has lost revenue and relationships.

STEWART: How does that make you feel?

HONGYAN (through translator): It makes me feel sad because we have been working together for a long time, but our deals have stopped due to the tariffs.

STEWART (voice-over): At first, she offered to slash prices for her long-time American customers, hoping to absorb some of the costs. Now, the tariffs are so high, most of her customers in the U.S. canceled orders completely.

STEWART: It's stories like this we're hearing from exporters here in Yiwu, one of the largest wholesale markets in the world. It's really ground zero in this trade war that's tearing apart the world's two largest economies.

So, how long has your family had this business?

LI XINYAO, BUSINESS OWNER: It's about 30 -- more than 30 years. America has always impacted the world. Yeah. When they start the trade war, all the people will worry about that.

STEWART (voice-over): But it's a two-way street. American consumers rely on places like this for the things they want at the price they want to pay, including something that has become an unmistakable symbol.

STEWART: Look what we found in the middle of this market, Donald Trump's trademark hat made in China.

STEWART (voice-over): Last year, vendors here sold around $11 billion worth of products to the United States. But even before Trump 2.0, China saw this trade war coming. To get ahead of it, exporters are already diversifying. Right now, half of Nie Ziqin's business is with the U.S. She tells me she's not worried.

NIE ZIQIN, WHOLESALE VENDOR: My next step is to transfer my U.S. sales routes to the E.U. Last year, we also began designing products we can sell to the Chinese domestic market.

STEWART (voice-over): American consumers have long been hooked on cheap Chinese products. Giving them up might not be easy.

(END VIDEOTAPE)

BERMAN: All right. Marc Stewart is with us now. And Marc, we should just be clear that the official Trump store says that its official 'Make America Great Again' hats are made in the U.S., presumably all sorts of vendors in China can make all sorts of things. But that aside, were any of the people you spoke with optimistic that this trade war can be resolved?

STEWART (on camera): Well, John, it's tricky because right now, China is dealing with a long list of economic challenges. For one thing, people aren't spending as much, but many of the merchants that we've talked to here are certainly embracing China's playbook for the future, by not depending so much on the U.S. for business. In fact, as we've walked these halls, we have seen buyers from all over the world.

Yes, China is known as the world's factory, but it's also trying to diversify. For one thing, the government has made technology a national priority almost, doubling down, John, on things like A.I., like robotics, and as we have seen in recent months, electric vehicles.

BERMAN: All right, Marc Stewart for us in Beijing tonight. Thank you very much. Next, the latest on a spate of investigations on Defense Department appointees that one source tells CNN could amount to a purge.

(COMMERCIAL BREAK)

[20:59:02]

BERMAN: More breaking news and update to a story we told you about last night. Colin Carroll, Chief of Staff to Deputy Secretary of Defense Steve Feinberg, is the latest Pentagon appointee to be placed on administrative leave and what one source describes the CNN as a purge of Pentagon officials. The recent string of investigations is reportedly related to disagreements with Defense Secretary Pete Hegseth's Chief of Staff.

They come just weeks after Secretary Hegseth himself shared sensitive details of an ongoing military operation in a Signal group chat that accidentally included a reporter. Two other political appointees of Hegseth, Senior advisor Dan Caldwell and Deputy Chief of Staff Darin Selnick were also placed on leave this week. Caldwell is being investigated over an alleged unauthorized disclosure.

Now, a quick reminder of a CNN Premiere, Eva Longoria, seeing how Spain went from culinary obscurity to world-class food destination. Her first stop, Barcelona in the Catalonia region. That's "Eva Longoria Searching for Spain," Sunday, April 27th at 9:00 p.m. on CNN. Sounds awesome.

That does it for us this hour. I'll be back tomorrow morning.