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The Situation Room

Harvard Sues Trump Administration; Supreme Court Hears Case on Religious Freedom; U.S. Economic Forecast Slashed. Aired 11-11:30a ET

Aired April 22, 2025 - 11:00   ET

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

[11:01:13]

PAMELA BROWN, CNN HOST: Happening now, breaking news: a heavy blow to economies worldwide, the stark new forecast on the impact of President Trump's trade war.

WOLF BLITZER, CNN HOST: We want to welcome our viewers here in the United States and around the world. I'm Wolf Blitzer with Pamela Brown, and you're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: And we begin this hour with a very troubling new economic prediction, one that could fuel more global uncertainty, the International Monetary Fund, the IMF, officially downgrading its global growth forecast this morning.

Let's go right now to see the business and politics correspondent Vanessa Yurkevich, who's in New York.

PAMELA BROWN, CNN HOST: Vanessa, walk us through this new forecast from the IMF.

VANESSA YURKEVICH, CNN BUSINESS AND POLITICS CORRESPONDENT: Yes, Pamela, this forecast is essentially a downgrade of what they initially thought the global economy and the U.S. economy would be doing in 2025. And it's not just the downgrade. It's the language around how they described how they came to this -- to this answer.

They said that this was because of an escalation of trade tensions and extremely high levels of policy uncertainty. And they said that this outlook was put together under -- quote -- "exceptional circumstances."

And you can see that economic growth forecast right there for the global economy growing by about 2.8 percent in 2025. Look at the difference from 2024. And then the U.S. is now seeing a steeper slowdown, according to the IMF, so growing by 1.8 percent, compared to 2.8 percent last year.

And these are pessimistic revisions from what the IMF initially thought in January, but with all of this trade uncertainty and with all of these tariffs, they're now seeing a downward revision of this economic outlook. Now, this comes at the same time that the dollar is seeing its weakest

level in three years, but, at the same time, gold prices are hitting new records. Investors are putting their money into gold because it is often a safe haven when they feel like there are other markets that are too volatile for their money.

Gold is often inflation-proof, recession-proof, and really is resilient amidst economic uncertainty. Also, if we look at markets right now -- I just want to point your attention to what markets are doing -- markets are up. There's a rally happening right now because just yesterday we saw the Dow down more than 1,200 points at one point in the day.

But this is a rally as investors are trying to claw back some of those losses, investors trying to bargain-shop on some stocks. But,ultimately, what this does is paint the volatility of the markets right now, the up-and-down nature, the swings that are happening.

This is really what investors and analysts have been saying is going to happen for a while as this trade war continues to fuel uncertainty and as you continue to get economic reports like this one from the International Monetary Fund -- Wolf, Pamela.

BROWN: All right, Vanessa Yurkevich, thanks so much.

BLITZER: Yes, Dow up about 800 points, a nice recovery, at least on this day. We will see what happens the rest of the day.

And joining us now for more on all of this is Ed Luce. He's the U.S. national editor for "The Financial Times."

Ed, thanks for joining us.

What's the significance of this new IMF outlook about the global economy?

EDWARD LUCE, U.S. NATIONAL EDITOR, "FINANCIAL TIMES": Well, I think the significance is, it's highly anticipated that they were going to be downgrading growth forecasts.

And, to some extent, I'm surprised they didn't downgrade them even more. I mean, 1.8 percent U.S. growth this year is still relatively on the high side, I would have thought, if you see a resumption of the trade war.

But the significance is, it just sort of feeds into this dawning and quite dramatic realization on the part of markets that U.S. economic policy is going to be capricious, unpredictable, and very hard climate in which to invest, whilst Donald Trump remains president. That's really the sort of -- the salient fact in all of this.

[11:05:22]

They don't trust President Trump.

BROWN: A lot of economists say that the economic turmoil that you just laid out, it's manmade. It's not a crisis beyond our control, like the pandemic.

In that case, does it make it easier to change course now? Or can you not put the genie back in the bottle?

LUCE: Well, so the last two or three weeks have been a real schooling of President Trump in terms of market pushback against this trade war.

And yet, on Monday morning, yesterday, he comes out and says that Jerome Powell, the chair of the Fed, should cut rates now and keeps reiterating threats to fire him, which he's not allowed to do under the law. And that's just sort of -- that then triggered the biggest one-day sell-off in decades.

So he's been schooled, but it doesn't seem like he's learned the lesson. And I think that the markets are learning the lesson that he is inherently volatile.

BROWN: Let me just follow up on that, though, because what you painted is this picture of investors, particularly foreign investors, no longer trusting the U.S. as a safe place to invest, and they -- that basically it won't change until there's another president.

But is there a way? I mean, is it easier to gain back their trust given the fact this is manmade? Or do you think that that's foregone, that the U.S. has sort of indefinitely lost the trust of really important foreign investors?

LUCE: So, the bright scenario is that some time in the next 80 days -- there was a 90-day pause on all the trade wars except for China -- that some time in the next 80 days, you will see Trump signing up to some kind of deal, face-saving deals with the big players, namely, the E.U., Canada, Mexico and China -- those are the ones that really matter -- and then backs off.

That's a positive scenario. And it's quite conceivable that that might happen. But we are nevertheless going to be seeing this growth slowdown, which will cause his approval ratings to drop further. And I think he's been setting up Jerome Powell really as the fall guy on that.

And that goes to the heart of market trust in the dollar and the Treasury bond. If the Central Bank is not -- if its independence is not guaranteed, that's going to keep markets jittery whilst Trump is president.

BLITZER: Stocks, as I mentioned, are rebounding today. But, overall, the Dow is on track, as we're told, for its worst April since the Great Depression.

Would you consider this an economic crisis right now?

LUCE: I would, yes.

And as your previous questions implied, it is a self-inflicted economic crisis. It's kind of an economic war of choice, a bit like the Iraq War. This is, I think, being perceived by economists and investors around the world as the biggest own goal, in soccer terms, the biggest self-inflicted sort of blunder in economic policymaking in many, many, many years.

So I think that, until -- until Trump has a road to Damascus and says, look, I have realized that trade wars don't work, they aren't easy to win, tariffs are a tax, and they do lead to higher inflation, and, therefore, it is very difficult for the Fed to cut interest rates, as I have been demanding, if he has that kind of a U-turn, a conversion, well, then maybe -- well, then maybe the markets will stop rushing to gold and start buying U.S. Treasury bonds and U.S. stocks and shares again.

But it's quite hard to conceive of him being that ready to admit that he's been wrong.

BLITZER: Go ahead.

BROWN: You have to wonder, though, is anyone insulated from this economic turmoil?

LUCE: Well, I think, if you look at the damage to growth, the three countries that are most affected are Mexico, Canada, and the United States. Others can divert trade to each other.

So you're getting talks between the Europeans and the Chinese. You're getting China making an outreach to countries like Vietnam and Malaysia. So I think that the growth impact outside of North America is going to be considerably less than it will be in North America. And the worst affected will be Canada and Mexico, for sure.

[11:10:01]

But, as you know, next week, Canada has a general election in which its current prime minister, the Liberal Party leader, Mark Carney, is likely to win. And he's been very resolute in saying, we're not going to climb down on this. We're going to stand tough.

BROWN: All right.

BLITZER: We will continue to monitor what's going on, obviously.

Ed Luce, as usual, thank you very, very much.

And, right now, religious freedom and parental rights, that debate is in front -- in the front of the United States Supreme Court right now. We're going to break down the arguments. That's coming up.

And, later, demanding a release. Four Democratic lawmakers just got back from El Salvador, pushing for the release of Kilmar Abrego Garcia, the Maryland man who the Trump administration says was mistakenly deported. Those lawmakers will join us just ahead.

We're live here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

[11:15:36]

BROWN: Happening now, the debate over religious freedoms and public schools is before the Supreme Court. The justices are hearing these arguments over whether parents have the power to opt their children out of lessons that include books with LGBTQ themes, and, if not, does that violate their right to freely practice their religion?

Justice Sonia Sotomayor laid out some of the parents' objections.

(BEGIN AUDIO CLIP)

SONIA SOTOMAYOR, U.S. SUPREME COURT ASSOCIATE JUSTICE: Many of the affidavits that the parents put here said they don't mind teaching respect and kindness towards people who are different.

The objections appear to be with some of the teacher instructions, the ones having to do with altering the mind-set of children or the ones talking about gender being a guess at birth. Those were the things that I saw the parents objecting to.

(END AUDIO CLIP)

BLITZER: And joining us now, CNN senior legal analyst and former federal prosecutor Elie Honig.

Elie, thanks for joining us.

What are the arguments that both sides are making in this important case?

ELIE HONIG, CNN SENIOR LEGAL ANALYST: Well, Wolf, so this case came about when the Montgomery County Maryland Board of Education approved certain books for the curriculum that depict LGBTQ characters.

This is in public school. This is at the elementary level. A group of parents said, we'd like permission to withdraw our students, to have them excused from those particular lessons, and they were told, you cannot do that.

So the people who are challenging in this case is a group of parents really from various religions. There are Muslim parents in there, there's Catholic parents and there's Ukrainian orthodox parents. They're arguing, if violates the First Amendment right to free exercise of religion to have our students have to be exposed to these things that we don't agree with religiously.

The response from the school board, however, is, it does not violate the First Amendment merely to have children exposed to things that they might not agree with religiously. It would only cross the line if they were somehow coerced or pressured, and the argument is, that's not what's happened here.

BROWN: So we just heard that clip from Justice Sotomayor. You were listening to the arguments and what the justices have been saying. Do you get a sense -- and I know it's only a window, but do you get a sense of how the Supreme Court might come out on this issue? HONIG: Yes, Pam, I have a palpable sense from listening to the

arguments so far. I should note those arguments are still ongoing, but it seems pretty clear to me that this is lining up to be a 6-3-type decision, with the conservatives siding with the parents here in favor of their First Amendment rights and the liberals dissenting.

And if you listen to it, the liberal justices have been far more extensive and pointed in their questioning of the attorney for the parents. One justice who really jumped out at me I think was asking some interesting, provocative questions was Justice Ketanji Brown Jackson.

She asked the attorney for the parents, well, what if you had a teacher who was gay and had a photo of his or her wedding on the desk? Would that violate a student's First Amendment right? What if there was a transgender student in the class? And that's something that the students -- that other students' religious beliefs contradicted. Would that violate the First Amendment?

And the answer from the lawyer was really, no, those things are different because they wouldn't be coercive in the same way that a teacher reading out of a book as a lesson would be, but some really thought-provoking questions there. It does seem like this one's breaking along your traditional 6-3 lines.

BLITZER: How has the Supreme Court, Elie, ruled in recent years on these religious freedom cases?

HONIG: Well, Wolf, these decisions have been surprisingly infrequent, though there was a big one two years ago where the Supreme Court ruled in favor of religious rights. There was a high school football coach who was leading prayers after the end of football games, and the Supreme Court upheld that coach's right to do that.

There was another case back in 2018 when the Supreme Court sided in favor of a cake maker who did not want to make cakes for a gay wedding. So there have only been a few cases, but, generally speaking, Wolf, this Supreme Court has read the First Amendment religious protections quite broadly and ruled in favor of those type of challengers.

BROWN: All right, Elie Honig, thank you so much. Always great to see you.

BLITZER: Certainly is.

HONIG: Thanks, guys. All right.

BLITZER: And up next: a titanic legal clash. Harvard University is now suing the Trump administration.

We will dig into the school's arguments that the White House -- White House's actions are -- quote -- "unlawful."

(COMMERCIAL BREAK)

[11:24:38]

BLITZER: Happening now: Leaders from more than 100 colleges and universities are warning that political interference by the Trump administration is -- quote -- "now endangering American higher education" -- close quote.

This as Harvard University is filing a lawsuit against the Trump administration accusing the White House of violating the First Amendment in freezing federal funding to the school.

[11:25:01]

Joining us now is Laurence Tribe. He's a university professor of constitutional law at the Harvard Law School. He also acted as an important adviser to both President Obama and President Biden.

Professor Tribe, thanks so much for joining us.

The university says its constitutional rights have been violated. As I said, you aren't involved in this lawsuit, but help us better understand the claim that Harvard is making.

LAURENCE TRIBE, PROFESSOR, HARVARD LAW SCHOOL: The basic claim is one that really connects what's going on here to what's gone on throughout history when autocrats and tyrants and basically mafia-like leaders decide that they really don't want universities to be independent.

Nice little university you have there. Be a shame if something happened to it. That's what Hitler basically said, although it sounds different in the original German, when he said it to the University of Frankfurt and then took them over. That's what Orban has done in Hungary. That's what Erdogan has done in Turkey.

It's a standard technique. And, in this case, Harvard has filed a very detailed and I think irrefutable complaint making clear that all of the laws Congress has passed that impose conditions on universities as recipients of Congress' money, all of those laws, rather than supporting the Trump administration, support Harvard.

The laws establish that the university has to go through a number of procedural steps in order to meet the requirements of the federal government. But the federal government is not allowed to say, we don't agree with your way of thinking. We don't agree with the kinds of ideas that your students have. We don't think that you should allow that much peaceful protest.

This complaint makes it clear that, when the Trump administration confronted Harvard with a series of demands that amounted to a claim basically to take over the educational process, it had crossed the line, both in terms of the laws that Congress had passed and in terms of basic precepts in the U.S. Constitution.

And if we allow the government to take over private institutions that are centers of innovation, of medical advances, of advances in philosophy, of better understandings of history, we will play into the dictator's handbook, because that is what dictators want. They want to shut down independent thought and centers of potential opposition.

By taking the offense, Harvard has set an example for other universities, some of whom I think were teetering on the edge: Should we cave in, the way Columbia did, or should we stand up?

I think that Harvard is encouraging many others to stand up, because, when we win, and we will, they will realize that going along with dictatorial demands doesn't get them anywhere. The dictator is never satisfied. Give him an inch and he will take a mile.

And, instead, if you stand up for your rights, resist, use the legal system, it's surprising how well you can do. And I'm looking forward, as an observer, not a participant in this case, to seeing Harvard basically wipe the floor with these dictators.

BLITZER: We will see what happens.

On another major legal issue, Professor Tribe, a federal court will hear arguments later today over the president's use of the centuries- old Alien Enemies Act of 1798 to deport alleged Venezuelan gang members.

Do you know -- you know the Supreme Court well. Do you expect the justices will allow the administration to use this law in this way?

TRIBE: I doubt it. They certainly will not allow them to use this law without due process, without giving people a hearing.

In fact, when the Supreme Court a couple of days ago, at 1:00 in the morning, rendered an extraordinary decision telling the Trump administration, ordering it in no uncertain terms to stop dragging people off the streets and shipping them off to El Salvador until further order of this court, it sent an extraordinary signal that, despite the 6-3 division of the court on many other issues, as you were discussing with Elie Honig earlier, despite that, the court is at least 7-2, because only the twins of Justice Alito and Justice Thomas dissented.