What happened

Shares of jewelry retailer Tiffany & Co. (NYSE:TIF) stock took it on the chin today and are down 6.5% as of 2:30 p.m. EDT. Tiffany appears to be collateral damage in the burgeoning trade war between Donald Trump and Chinese President Xi Jinping.

As you'll recall, last week, all the news was about President Trump's plans to raise tariffs on $200 billion in Chinese imports if China didn't move forward with trade negotiations with the U.S. Well, on Friday, those new tariffs kicked in, and today, China kicked back -- with tariff hikes of its own as high as 25% on U.S. imports.

Chinese flag superimposed on falling stock market chart.

Image source: Getty Images.

So what

CNBC reports that China's new tariffs will hit imported U.S. "peanuts, sugar, wheat, chicken and turkey" and other products. While we can't confirm this just yet, it appears that Tiffany investors, at least, believe that diamonds and other jewelry will also be subject to the tariffs -- at least, that would explain the sudden decline in Tiffany shares on no other news of note today.

Now what

But just because both sides have made good on some tariff threats already doesn't mean this story is over yet. President Trump apparently has a further $325 billion worth of Chinese goods on his "to tariff" list. In the tit-for-tat tariff battle that's begun, the threat of these additional restrictions on Chinese trade could still convince the Chinese that escalating the trade battle is not in their best interest -- and cooler heads may yet prevail.

In the meantime, today's sell-off now has Tiffany shares underperforming the S&P 500 over the past 52 weeks. Although not exactly "cheap" at 21 times trailing earnings, Tiffany shares are back to trading where they were two months ago -- and may offer investors a chance to snag a quick bargain before this trade war ends in a truce.