The summer is heating up, and so is the rhetoric and the reality of an escalating trade war between the U.S. and several other countries. We are indeed living in unprecedented times, when what may seem like positive quickly turns negative and unintended consequences are guiding the fortunes of a lot of companies.

A poster child of this effect was this week's earnings release and press conference from Whirlpool, the appliance company. In an earnings season that has been really strong, the company saw its stock drop 14 percent as it disclosed higher raw material costs — notably steel. Analysts downgraded the stock on concerns that it will not hit its revenue targets. The kicker here is that Whirlpool was happy earlier this year to tout the announcement of tariffs being imposed on foreign washing machines. But the flip side of the tariff equation is what is now hurting the company.

An interesting side note is that the company's CEO, Marc Bitzer, noted in the press conference that U.S. steel is 50 percent more expensive than the rest of the world — a level he called “unexplainable" — with the implication being that steel companies in the U.S. are raising their prices more than what can be justified by tariffs. In fact, we are starting to see a lot of business adjustments and disruptions as this unfolds.

That said, what is the effect of tariffs on markets as a whole? We were debating that on the foreign exchange desk this week. While there are a lot of indicators out there, equities are a great measure of market sentiment. If you take mid-April as the time when tariffs really started to become real to markets, the S&P 500 index is up nearly 5 percent, Mexico's equity market is up 2 percent, Canada's main index is up nearly 6 percent, and Europe is up just over 1 percent. The Shanghai Composite Index, however, dropped more than 14 percent from its recent high before coming back 6 percent in recent days as China has been aggressively easing monetary conditions.

Our View: On their face, equities are not sounding the alarm around trade wars in most countries except China. Of course, there is a huge caveat here, which is that all these markets have many factors affecting them. The U.S. is no doubt enjoying tailwinds from lower corporate taxes this year as well as an environment of deregulation. Canada's economy has been strong and it is enjoying higher oil prices that are supporting its energy exports.

That said, individual sectors and companies need more analysis. For that, we refer you to how City National Rochdale is approaching investment decisions in this environment. You can see that in Matthew Peron's latest Market Perspectives video. Be sure to sign up for their webinar, Trade Wars: What's Our Battle Plan, next Wednesday as well.

If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447 4133.

The information in this report was compiled by the staff at City National Bank from data and sources believed to be reliable but City National Bank makes no representation as to the accuracy or completeness of the information. The opinions expressed, together with any estimate or projection given, constitute the judgment of the author as of the date of the report. City National Bank has no obligation to update, modify or amend this report or to otherwise notify a reader in the event any information stated, opinion expressed, matter discussed, estimate or projection changes or is determined to be inaccurate. This report is intended to be a source of general information. It is not to be construed as an offer, or solicitation of an offer, to buy or sell any financial instrument. It should not be relied upon as specific investment advice directed to the reader’s specific investment objectives. Any financial instrument discussed in this report may not be suitable for the reader. Each reader must make his or her own investment decision, using an independent advisor if prudent, based on his or her own investment objective and financial situation. Prices and availability of financial instruments are subject to change without notice. Financial instruments denominated in a foreign currency are subject to exchange rate risk in addition to the risk of the investment. City National Bank (and its clients or associated persons) may, at times, engage in transactions in a manner inconsistent with this report and, with respect to particular securities and financial instruments discussed, may buy from or sell to clients or others on a principal basis. Past performance is not necessarily an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.