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Embargo (1807–1809)

In December 1807, news arrived that Napoleon had extended the Berlin Decree, globally banning British imports. In Britain, King George III ordered redoubling efforts at impressment, including American sailors. But Congress had no appetite to prepare the U.S. for war. Jefferson asked for and received the Embargo Act, an alternative that allowed the U.S. more time to build up defensive works, militias, and naval forces. Meacham said that the Embargo Act was a projection of power that surpassed the Alien and Sedition Acts, and R. B. Bernstein said that Jefferson "was pursuing policies resembling those he had cited in 1776 as grounds for independence and revolution".

In November 1807, Jefferson, for several days, met with his cabinet to discuss the deteriorating foreign situation. Secretary of State James Madison supported the embargo, while Treasury Secretary Gallatin opposed it, due to its indefinite time frame and the risk to the policy of American neutrality. The U.S. economy suffered, criticism grew, and opponents began evading the embargo. Instead of retreating, Jefferson sent federal agents to secretly track down smugglers and violators. Three acts were passed in Congress during 1807 and 1808, called the Supplementary, the Additional, and the Enforcement acts. The government could not prevent American vessels from trading with the European belligerents once they had left American ports, although the embargo triggered a devastating decline in exports.

In December 1807, Jefferson announced his intention not to seek a third term. He turned his attention increasingly to Monticello during the last year of his presidency, giving Madison and Gallatin almost total control of affairs. Shortly before leaving office in March 1809, Jefferson signed the repeal of the Embargo. In its place, the Non-Intercourse Act was passed, but it proved no more effective. The day before Madison was inaugurated as his successor, Jefferson said that he felt like "a prisoner, released from his chains".