Tariffs now make financial markets expect long-term inflation, not just a quick price hike

Financial markets started pricing inflation differently in 2025. They now expect tariffs to cause long-term inflation, not just a temporary price bump.

Economists used to think tariffs caused a one-time price increase. This paper shows financial markets now price tariffs as a signal of persistent policy, leading to long-term inflation expectations. Central banks and investors will need new models to predict inflation when trade policy shifts.