On August 15, 1971, President Nixon announced the imposition of a ten per cent ad valorem surcharge on all dutiable imports. According to the President, the surcharge was necessary because an overvaluation of United States currency had created a situation in which United States imports were increasing faster than exports, contributing to a balance of payments deficit.

To correct the overvaluation, the President could have unilaterally devalued the dollar, thus effecting a realignment of exchange rates. However, there was some concern that such an action by the United States would lead to similar devaluations by other countries, thereby negating any benefits the United States would derive from its devaluation. Therefore, the President chose to impose the surcharge as a temporary measure to slow the rising tide of imports and to encourage other countries to negotiate a realignment of exchange rates. When a realignment agreement was reached in December 1971, the President terminated the surcharge, reestablishing the rates of duty that were in effect on August 15, 1971.