Jefferson was re-elected president in 1804, winning by a landslide. This demonstrated the widespread popularity of his policies and his continued leadership of the Democratic-Republican Party.

In response to British and French interference with American shipping, Jefferson signed the Embargo Act, which prohibited American ships from trading with foreign ports. The act was intended to pressure Britain and France to respect American neutrality, but it had a devastating impact on the American economy. This was a highly controversial policy.

The Embargo Act became increasingly unpopular, particularly in New England, where merchants and shippers heavily relied on foreign trade. Jefferson faced growing criticism and resistance to the embargo from both Federalists and some members of his own party. The enforcement of the act became increasingly difficult.

Just before leaving office, Jefferson signed the repeal of the Embargo Act, replacing it with the Non-Intercourse Act, which allowed trade with all nations except Britain and France. The Embargo Act is widely regarded as a policy failure that damaged Jefferson's reputation.