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Illustration: Rebecca Zisser/Axios
There are no calm waters in sight in the U.S.-China trade fight, but even before the latest round of tariffs, the retail industry had been tumbling in a whirlpool, Axios' Erica Pandey writes.
The backdrop: For the past few quarters, retailers have warned analysts about the U.S.-China trade war's potential to hurt sales as tariffs push prices up and turn shoppers away. But those effects have been invisible so far because the first two rounds of tariffed products largely excluded consumer goods.
Now things are changing, with tariffs being imposed on the third and fourth "lists" of goods set out by the Trump administration.
Where it stands: In recent earnings calls, big retailers like Kohl's, Nordstrom and JCPenney have reported disappointing sales numbers and said that the impact of tariffs could make things worse.
The bottom line: "This last round of tariffs, should it occur, is going to be a big challenge," said Mike Zuccaro, an analyst with Moody's.
Data has consistently shown that trade between the U.S. and China is slowing down significantly, so much so that Mexico recently supplanted China (and Canada) as the top U.S. trading partner.
Deutsche Bank Securities chief economist Torsten Slok points out that the U.S. has clearly shifted one-to-one its imports away from China and toward the rest of the world.
What they're saying: Analysts at Nomura now say there's a 65% chance the U.S. puts tariffs on all imports from China, and strategists at JPMorgan and Goldman Sachs are rewriting expectations as well.
"Additional trade-related actions taken over the last several days further raise the risk of additional US tariffs on imports from China and further reduce the chances of a formal agreement at the June G20 meeting," Alec Phillips, a strategist on Goldman Sachs' economic research team, wrote in a note to clients Wednesday.
Axios' Courtenay Brown writes: The Federal Reserve plans to remain "patient" in determining future interest rates moves, even if "global economic and financial conditions continued to improve," according to minutes released Wednesday of the Fed's most recent meeting. They did not raise or lower interest rates at that meeting, despite pressure from President Trump to lower them.
Why it matters: The U.S. economy has been humming along — with solid job gains, low unemployment and receding "uncertainties affecting the U.S. and global economic outlooks," per the meeting minutes — but the market is still betting that the central bank will cut rates before the end of the year, not raise them.
Credit monitoring agency Experian this week released its report on the state of Americans' credit. The company examined today's consumer credit behaviors and compared them to those in 2008.
What to watch: Younger people have recently had increasing delinquency issues and are taking on credit cards and borrowing more, but Experian points out that it's older people who are leading some concerning trends.
Axios' Dave Lawler writes: A long-awaited test for Europe's far-right begins today with European parliamentary elections, which will send a medley of nationalists to Brussels and a message to mainstream parties all over the continent.
The far-right is growing in strength, but it's hardly a unified force. Things tend to get messy when nationalists, campaigning on "sovereignty," attempt to join hands across borders.
The big mainstream blocs — the center-left Social Democrats and the center-right European People's Party — are likely to lose their long-held combined majority. That means a shift in Brussels' balance of power.
Why it matters to the market: Turnout is often low in these elections, but the consequences can be significant.
What to watch: "Keep an eye on euro because there could be big moves in the currency over the next few days," says Kathy Lien, managing director of FX Strategy at BK Asset Management.
The bottom line: The dollar has risen to its strongest level since 2017, and been cited by U.S. businesses as a primary drag on overseas sales and profits. The euro and pound are the 2 largest components of the dollar index, making up nearly 70% of its value.