There was a huge and sudden decline in retail stocks on Thursday, which swept through the sector beginning around 1:20 p.m. Eastern time. A number of retail stocks quickly sold off between 10 percent and 15 percent. There didn’t appear to be any news related to any individual company that set off the decline.

What Triggered the Retail Stock Collapse?

The culprit? President Donald Trump decided to extend tariffs to the remaining $300 billion of imported Chinese goods that haven’t already been taxed.

And it wasn’t just retail stocks that got hit. The entire stock market did. Yet the market recovered while retail stocks showed only modest improvement.

What triggered this tariff move, and what is the near-term and longer-term future for these retail stocks?

Donald Trump increased tariffs in what appeared to be part of his broader strategic approach with Chinese trade. The last thing the stock market had heard regarding the trade war was a few weeks ago when Chinese President Xi agreed to buy more American agricultural products and crack-down on the flow of fentanyl into the country.

Donald Trump said that China had not followed through on either promise.

As it is, China is a difficult opponent when it comes to many issues. This is compounded by the fact that its government is entirely opaque, and there are numerous internal crosscurrents that affect Chinese policy that the U.S. will never understand or even know about.

Retail and Department Store Stocks Crushed

As for the retail stocks, companies like Dillards, Children’s Place, The Gap, Ralph Lauren, Abercrombie & Fitch, and many other clothiers whose goods are produced in China saw their stocks whacked.

Numerous department stores were hit as well, including Macy’s, Nordstrom, and Kohl’s.

Most were down by 10 percent or more at the close.

As far as the near-term goes, this may create a solid buying opportunity in many of these names. For those who have been watching carefully since the trade war began, the stock market as a whole and individual stocks tend to react very sharply when there is news of any kind, positive or negative.

In fact, a few weeks ago when news broke regarding China’s supposed agreement regarding agricultural products and fentanyl, the market shot up.

But Now Those Stocks Are Cheap

The trade war generates tremendous investor emotion, which translates into volatility. Yet in paying attention to movements of the stock market and individual stocks when these news items break, prices tend to reverse after the initial panic or euphoria. Today it was panic.

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