President Donald Trump’s weekend announcement of tariffs on Mexico, Canada and China were translating into a shock for market-based inflation expectations, prompting traders to now expect an annual headline rate from the consumer-price index that’s closer to 3% for much of 2025.

Are tariffs inflationary? Who will shoulder the increased cost? Will tariffs cause a recession? How do tariffs affect different products?

Federal Reserve officials are closely watching the levies, given the expectation that such policies could lead to higher prices.