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.

• Steep 25% tariffs on the third list, which went into effect this month, will affect things like instant coffee and bathrobes.
• The fourth list includes all imports from China and will touch common consumer products like clothes and shoes.
• Worth noting: Several types of apparel are heavily tariffed even without the additional duties, says Hun Quach of the Retail Industry Leaders Association. For example, swimsuits already face a 25% tariff and dresses, 16%.

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 big picture: The threat of tariffs comes amid decades-long changes in U.S. retail that has been shuttering malls and emptying out Main Streets across the country.

The latest: Dressbarn plans to close all 650 of its stores, and Payless ShoeSource will close its 2,600 stores by July.

• Hundreds of footwear sellers, including Nike and Adidas, sent an open letter to President Trump saying the effect of tariffs would be "catastrophic" for them.
• Even the retailers reporting strong growth, such as Macy's and Walmart, said tariffs will likely drive prices up.
• As many as 12,000 store closures could happen this year if tariffs become a tipping point for smaller or struggling retailers, writes UBS analyst Jay Sole.

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.

• Investors clearly expect things to work themselves out, but economists and market analysts at major banks are starting to worry more publicly that the trade war isn't ending anytime soon.

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.

• "While there is substantial uncertainty, we believe the odds are slightly greater that further US-China tariff escalation is avoided. That said, this is a close call and without additional signs of progress over the next few weeks, implementation of the next round of tariffs on $300bn of imports from China could easily become the base case."

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.

• While those aged 72 and older have higher credit scores than any other group, "they saw the most significant drop in average credit scores, with a decrease of 40 points (772 in 2008 compared with 732 in 2018).
• "This group also had the most significant increase in credit card balances, up $767 in 2018 to $4,703 (compared with $3,936 in 2008). They also experienced the largest increase in mortgage debt, up $29,602 for a total of $160,735 in 2018 (compared with $131,133 in 2008)."

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.

• Matteo Salvini, the Italian leader of a new far-right bloc, has cobbled together a far-right coalition that’s expected to take about 10% of the new parliament. But it doesn't include Viktor Orbán, Poland's populist ruling party, or the Brexit Party — which is taking British politics by storm.

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.

• "Elections should give some insight into the next major elections across Western Europe. From that, we can infer some potential investment themes," says Win Thin, global head of currency strategy at Brown Brothers Harriman.
• Markus Schomer, chief economist at PineBridge Investments, tells Axios the 2014 vote was the "catalyst" for Brexit because the U.K. Independence Party triumphed over Britain's Conservative government, which in turn offered a referendum on EU membership.
• "My worry is something could happen in these elections that lights the fuse for another Brexit-like event a few years from now," he says.

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.

• There could also be big moves in the British pound, which has been falling based on the reduced likelihood of Brexit being turned back.

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.

• How these elections play out could help determine whether the dollar's strength continues.

Go deeper: Populism smothers Europe's mainstream conservatives