What happened

A day after shares of Nordstrom (NYSE:JWN) surged on a better-than-expected earnings report, the stock was giving back some of those gains today. The market broadly fell following China's announcement of $75 billion worth of retaliatory tariffs on the U.S. and comments from President Trump urging American companies to stop doing business with China and to instead manufacture products in the U.S. Trump also ripped into Fed chief Jerome Powell because he seems to think Powell isn't doing enough to stimulate the economy.

The news shook investors and pushed the S&P 500 down 2.5% as of 3:35 p.m. EDT on Friday. The SPDR S&P Retail ETF was down 3.9% at that time, and Nordstrom, which has been a particularly volatile stock of late, had fallen 6%. 

The entrance to a Nordstrom Rack store

Nordstrom Rack, the chain's discount outlet. Image source: Nordstrom.

So what 

Nordstrom may have been expected to give up some of Thursday's gains; the stock's 16% surge came in spite of revenue falling 5% in the second quarter and its decision to cut its full-year guidance. But there's no question that today's trade tensions are contributing to the sell-off. The retail sector, which is already struggling, has been especially sensitive to trade tensions since nearly all U.S. retailers import a substantial percentage of their inventory from China.

Nordstrom is no exception, and the company seems to be at a turning point these days. Sales are falling at both its full-line and off-price chains. Even growth in its digital channel, where the company has shined, has slowed nearly to a halt. 

Now what

The company has a well-respected brand and a unique position in retail as a combination of a high-end department store chain and off-price business. It has been willing to experiment with projects like Nordstrom Local and Trunk Club, which it acquired in 2014. Its upcoming opening of its flagship store in New York should also help give a lift to both its sales and its brand in a key market. But today's sell-off makes one thing clear: The stock won't recover its losses over the last year until the company's financial performance significantly improves.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.