Harvard, Trump Administration Face Off in Court Over Research Funding

Summary

Harvard and the Trump Administration Clash Over Research Funding

In a significant legal battle, Harvard University is confronting the Trump administration over a substantial reduction in research funding. The dispute was highlighted in a federal courtroom in Boston on July 21, 2025. Higher Education Reporter Sarah Randazzo provided an in-depth analysis of the arguments from both sides.

Harvard initiated the lawsuit in response to the administration's unilateral decision to cut over $2 billion in research funds, citing concerns about antisemitism and misalignment with government priorities as justifications. Randazzo explained, “Harvard is essentially saying that's a free speech violation because they weren't allowed to operate and speak as they wanted to” (01:19).

Harvard’s lawsuit rests on two primary arguments:

1. First Amendment Violation: The university contends that the government's demands infringed upon academic freedom and free speech by exerting undue control over faculty hiring and operations.
2. Improper Procedure: Harvard alleges that the administration failed to follow the necessary protocols for grant reductions, thereby acting unilaterally and improperly.

Conversely, the Trump administration maintains that these grants were contractual and that the government reserves the right to terminate contracts if the recipient no longer meets its standards. They argue, “We have the right to cancel contracts if we no longer want to be in business with this party” (01:19).

The immediate legal maneuver involved Harvard filing a motion for summary judgment, seeking an early resolution without protracted litigation. Both parties are vying for this expedited ruling, which could potentially lead to an early decision in favor of Harvard. However, Randazzo cautioned that even a court victory might not resolve all tensions, as the administration could appeal the decision through higher courts, including the Supreme Court, and continue to pressure Harvard on other issues like international student policies and tax matters (03:00).

McKinsey Alters Leadership Selection Process

In internal governance changes, McKinsey & Company is revamping its leadership election process to address internal tensions and infighting that have plagued its recent leadership contests. Previously, McKinsey’s 750 senior partners elected a global managing partner every three years, with the possibility of serving two terms. However, the firm is now shifting to elect a global managing partner for a single six-year term. At the four-year mark, partners will hold a confirmation vote to decide whether the leader should continue for the remaining two years.

Additionally, McKinsey plans to reduce its board size from 30 members to 12, aiming for a more streamlined and focused oversight body. Current Global Managing Partner Bob Sternfels stated, “A smaller, more focused board will provide greater oversight on the firm's leaders,” emphasizing the need for enhanced governance and reduced bureaucratic complexity.

Potential Tariffs on Chip Imports and Their Implications

The Wall Street Journal’s economist Asa Fitch discussed the looming threat of tariffs on semiconductor imports and their potential ramifications for the global chip industry. The administration, under President Trump, has hinted at imposing tariffs on chip imports, a move that could significantly disrupt the market dynamics.

Fitch elaborated on the possible scenarios: “There are a couple of ways in which chips could be tariffed. One is that the US could put a direct tariff on chips imported in the US that actually wouldn't have a major impact because only roughly $45 billion of chips were imported directly last year” (05:17). He noted that the more substantial impact would likely come from tariffs on electronics containing chips, rather than the chips themselves. For instance, applying tariffs to the chip components within mobile phones—where 60% of a $114 billion import value is attributed to chips—could quickly escalate the economic impact.

Further complicating the situation, Asa Fitch pointed out the substantial investments made by leading chip manufacturers like TSMC, Intel, and Samsung in expanding U.S. manufacturing capabilities. However, establishing advanced chip factories is capital-intensive and time-consuming, often requiring tens of billions of dollars and years to reach full production capacity. Additionally, potential EU-specific tariffs on critical machinery from companies like ASML in the Netherlands could deter domestic manufacturing expansion, even with significant investment (06:38).

US EV Battery Makers Pivot to New Markets

The EV battery sector in the United States is experiencing a strategic shift as companies seek new markets amidst a slowing electric vehicle (EV) market. WWJ’s reporter Chris Otz explained that battery manufacturers are diversifying their customer base to include utilities, wind and solar power developers, and data centers that support artificial intelligence (AI) applications.

Otz highlighted that the original investments by battery companies in the U.S. were predicated on a more aggressive adoption of EVs. However, as the EV market growth has plateaued, these companies face overcapacity. To mitigate this, they are now targeting energy storage solutions for the growing demand in electricity and the burgeoning AI industry, which requires substantial data processing capabilities that battery storage can support (09:28).

The pivot not only helps alleviate the overcapacity issue but also aligns with the increasing global emphasis on sustainable energy and advanced technological infrastructure. Otz concluded, “It's certainly helpful coincidental timing that this market is growing as the EV market is really plateauing… they have this other outlet for that capacity” (10:22).

Additional Business News

Dynamics to Merge and Form Ether Machine

Blank check company Dynamics announced plans to merge with another entity, resulting in the formation of a new company named Ether Machine. This merger aims to manage over $1.5 billion in Ether, positioning the company to capitalize on the increasing institutional interest in cryptocurrency under the Trump administration’s crypto-friendly policies.

China Blocks Wells Fargo Banker from Exiting the Country

China's Foreign Ministry confirmed that it has blocked Wells Fargo banker Chenwe Mao from leaving the country, citing her obligation to assist in an ongoing criminal investigation. This marks Beijing's first explicit confirmation of an exit ban related to such a case. Details regarding the nature of the probe or Mao’s specific involvement were not disclosed by the ministry’s spokesperson.

The Myth of Multitasking: Impact on Productivity and Accuracy

Journal Reporter Lauren Weber discussed the misconceptions surrounding multitasking, particularly in contexts where individuals use earbuds to engage in multiple activities simultaneously. According to a psychologist Weber interviewed, “There is no such thing really as multitasking,” (12:02) explaining that what individuals perceive as multitasking is actually a rapid shifting of attention between tasks. This habit can lead to decreased performance and increased likelihood of errors, even in routine or customer-facing jobs.

Conclusion

This episode of WSJ What’s News delves into critical developments ranging from high-stakes legal battles between Harvard and the Trump administration, strategic shifts in major corporations like McKinsey, and potential economic impacts from proposed tariffs on the semiconductor industry. Additionally, it highlights the adaptive strategies of US EV battery makers in response to market changes and covers noteworthy updates in the cryptocurrency and international relations arenas. The episode concludes with insights into the fallacy of multitasking, emphasizing its detrimental effects on productivity and accuracy.

Transcript

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[Alex Osolev]

Harvard and the Trump administration face off in court plus, what tariffs on chips could mean for some of the world's most valuable companies.

[Asa Fitch]

It could have a major impact on the industry and where the industry shifts. Of course, the level that impact and the nature of it depends entirely on what the tariffs end up being.

[Alex Osolev]

And with EV business slumping, US Battery makers are finding a whole new market. It's Monday, July 21st. I'm Alex Osolev for the Wall Street Journal. This is the PM edition of what's news, the top headlines and business stories that move the world. Harvard University and the Trump administration faced off in court today in a federal courtroom in Boston. The Ivy League school argued that the government had no basis to cut more than $2 billion of its research funding. Higher education reporter Sarah Randazzo is here to tell us more. Sarah, what are both sides saying in this case?

[Sarah Randazzo]

Harvard filed this lawsuit a couple months ago, back when the Trump administration summarily cut about $2.2 billion of research funding. And the government has said it was because of concerns about anti Semitism and that essentially Harvard was no longer in line with government priorities and so it had the right to cut these funds. Harvard says that that was done improperly. And they have two real main buckets of arguments. The first is a First Amendment case. They say the government made all these demands on us, which is something Trump administration did. They said, Harvard, we want to have control over your faculty. Your hiring did a very strong arm reach into Harvard. Harvard rejected that and then these funds were cut. So Harvard is essentially saying that's a free speech violation because they weren't allowed to operate and speak as they wanted to. They're also arguing something a little more boring but equally important, which is there's a process to be done if grants are getting cut. And basically the administration didn't do that and they just cut them. So that's the Harvard side. And then on the government side they're saying, hey, these are contracts. We have the right to cancel contracts if we no longer want to be in business with this party. And we don't think you're operating up to our standards. And so they're trying to make it more into a contract dispute.

[Alex Osolev]

Okay, so the two sides were in court today. What happens next?

[Sarah Randazzo]

Harvard had filed what's called a motion for summary judgment, which is basically a ruling that would shortchange the case and just land them a win pretty early without having to exchange a bunch of documents and get into all of the nitty gritty of a typical lawsuit. And then the government similarly said, hey, no, you should hand us that early win. And so this is a typical process in most cases, but this one is a little more heated and it could lead potentially to an early ruling. And so they're basically asking the judge to say, yes, Harvard, you should win this case.

[Alex Osolev]

At this point, what would the outcome in this case mean? I mean, if Harvard won, would that just kind of be like waving a magic wand at Harvard would get its research funding back?

[Sarah Randazzo]

Likely not. There's a lot of battles that they're fighting with the administration in addition to this. And even in this case, any win will be appealed by the Trump administration up to the next level of a federal appellate court, and then that could be appealed up to the Supreme Court. So in court, there's a long potential road. And then out of court, the Trump administration administration continues to pressure Harvard on other fronts, including international students, their tax exempt status, endowment taxes. And so even a win in court here, while it would be crucial for this lawsuit, it isn't everything that Harvard's looking for.

[Alex Osolev]

That was WSJ reporter Sarah Randazzo. Thanks so much, Sarah.

[Sarah Randazzo]

Thanks so much for having me.

[Alex Osolev]

McKinsey is changing the way it picks its leaders for the first time in years, in an effort to circumvent the internal tensions and infighting that mark its past two elections. As part of changes to its governance, the elite consulting firm will now elect a global managing partner to a single six year term. Its partners will hold a confirmation vote at the four year mark on whether the leader should serve the remaining two years of the term. McKinsey's roughly 750 senior partners currently vote to elect a firm wide leader every three years. And that person can stand for two terms. In addition to the shifts to its election cycles, McKinsey will slim down its board from 30 people today to 12 in the future. McKinsey's current global managing partner, Bob Sternfels said the idea is that a smaller, more focused board will provide greater oversight on the firm's leaders. The artificial intelligence boom has lifted chip stocks this year and made Nvidia the most valuable listed company in the world. But the future looks increasingly murky because of a factor that investors seem to have largely shrugged off, tariffs. President Trump threatened to hit chip imports with tariffs after he took office this year. And though those haven't happened yet, the president suggested recently that tariffs on chips may be coming soon. Asa Fitch is a writer for Hurt on the street and joins me now. Asa, what do tariffs potentially mean for chip makers?

[Asa Fitch]

It could have a major impact on the industry and where the industry shifts. Of course, the level of that impact and the nature of it depends entirely on what the tariffs end up being. There are a couple of ways in which chips could be tariffed. One is that the US could put a direct tariff on chips imported in the US that actually wouldn't have a major impact on chips because only roughly $45 billion of chips were imported directly last year into the U.S. the fact is, we don't tend to import chips into the US Directly. We import electronics that contain chips from overseas. So the real impact could be if there is a tariff on these electronics or the value of the chips within electronics that are not made in the US that come into the US So to illustrate this, with mobile phones, we imported last year about $114 billion worth of those phones. 60% of the value of those phones came from the chips inside of them. So you start putting tariffs on that chip content within those mobile phones, it starts to become quickly a pretty big number.

[Alex Osolev]

Asa, I know that a lot of the world's largest chip makers like TSMC and Intel and Samsung have really increased their US Presence over the past few years. Would it be possible to then make these chips in the US Companies have.

[Asa Fitch]

Invested an incredible amount of money in the past few years in expanding the chip industry and chip manufacturing in the US These companies don't move on a dime. Chip factories take years to stand up from zero to full production. They cost tens of billions of dollars each. If you're talking about an advanced chip factory, that's not going to be enough, basically for these companies to completely replace their production overseas with production in the U.S. there are also EU specific tariffs that, for example, Trump has said may be coming. There's a company called ASML in the Netherlands. This company makes very, very expensive equipment that goes into chip factories. If that gets slapped with a 30% tariff, that could change the calculations of companies that are thinking about doing domestic.

[Alex Osolev]

Production in the US that was WSJ heard on the street writer Asa Fitch. Thanks Asa.

[Asa Fitch]

Thank you.

[Alex Osolev]

Stocks rose broadly today after last week's earnings helped drive more records. Major US indexes were mixed. The Nasdaq rose about 0.4%. The S&P 500 added about 0.1%, while the Dow ended off a tad. Leading economic indicators say the US Economy is set to slow. That's according to the leading economic index published today by the Conference Board. The index declined 0.3% to 98.8 in June, a stronger fall than economists expected. A spokesperson for the Conference Board said that while no recession has yet been forecast, the impact of tariffs will become more pronounced in the second half of the year through higher prices. Coming up, the new market that EV battery makers are turning to that's after the break.

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[Alex Osolev]

Big US EV battery makers are stepping back from the market that got them started and betting on a new set of customers in an entirely different business. Instead of carmakers, these companies have started making batteries for utilities, wind and solar power developers, and massive data centers that train artificial intelligence. For more, I'm joined now by Chris Otz, who covers autos for the Journal. Chris, why are we seeing this kind of pivot?

[Chris Otz]

Well, it's two things. Three, four, five years ago, battery companies and automakers together were laying down plans to invest billions of dollars in new factories to build electric vehicle batteries in the United States. This was all predicated on adoption of electric vehicles. That was thought a few years ago to be on a much faster pace than it has turned out to be. So there's a lot of overcapacity in the battery industry for EVs, and what's helping right now to fill that capacity is the growth of electricity demand. And the biggest thing that's changed in recent years is the development of artificial intelligence. Tech companies are standing up. These data centers and batteries are the fastest way to bring new capacity onto the grid. And that's where batteries can come in as well.

[Alex Osolev]

What could we see the impact be from this kind of expansion of this side of the business?

[Chris Otz]

It's certainly helpful coincidental timing that this market is growing as the EV market is really plateauing presumably the industry would be in an even bigger hole if it didn't have this other outlet for that capacity.

[Alex Osolev]

That was WSJ reporter Chris Otz. Thanks Chris.

[Chris Otz]

Thank you.

[Alex Osolev]

In other news, Blank Check company Dynamics announced today that it plans to merge with another entity to create a new company known as the Ether Machine. The combined company plans to manage over one and a half billion dollars in Ether, the second largest cryptocurrency. It's a bet that investors will continue to reward businesses that pour money into crypto holdings under the industry friendly Trump administration. And China's Foreign Ministry said today that China blocked Wells Fargo banker Chenwe Mao from leaving the country because she's required to assist in a criminal probe. This marks Beijing's first confirmation of the exit ban. A Chinese Foreign Ministry spokesman didn't give details of the case or elaborate on the nature of Mao's involvement. And finally, it's no secret that earbuds are ubiquitous, allowing people to answer calls or listen to podcasts like this one while doing other things. Some people are wearing them all the time while doing tedious tasks, sure, but also when working in customer facing jobs and even at the doctor's office. Journal reporter Lauren Weber told our Tech News Briefing podcast that as far as your brain is concerned, that multitasking is kind of a myth.

[Lauren Weber]

I spoke to a psychologist who recently wrote a book about attention and she said the bad news this was bad news for everyone, even those of us who don't keep our AirPods in. The bad news is there is no such thing really as multitasking, she said. What you're actually doing when you think you're multitasking is shifting your attention back and forth. So if you're listening to a podcast while you're reading a book or sitting on the subway catching up on the news, you're not actually doing either one of those things well, which she said also raises the chances that you make mistakes when you're doing something like a task.

[Alex Osolev]

To hear more, check out tomorrow's episode of Tech News Briefing. And that's what's news for this Monday afternoon. Today's show is produced by Pierre Biennime with supervising producer Michael Cosmidis. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.