Beggar-Thy-Neighbor Policy

A policy action that benefits one nation's economy but worsens economic performance in another nation.

When a large country applies a tariff, a part of the tariff is shifted backwards resulting in a gain for the country that applied the tariff because the domestic government captures foreign producer surplus as tariff revenue. A form of this policy, notably the tariff barrier, was implemented at the beginning of the Great Depression with almost no success. A beggar-thy-neighbor policy in the United States caused other countries to follow suit, resulting in a massive decrease in international trade. This made the Depression worse.