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How did the Great Depression spread from the United States to other countries?

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A long line of unemployed men in coats and hats stands outside a soup kitchen in Chicago, with a storefront sign reading Free Soup, Coffee and Doughnuts for the Unemployed. — Great Depression Unemployed men standing in line outside a soup kitchen, Chicago.

The Great Depression spread globally through several interconnected economic mechanisms, primarily driven by the international gold standard, the contraction of credit, and protectionist trade policies.12

The Gold Standard

The gold standard acted as a primary transmission channel for the economic decline. Because countries pegged their currencies to gold, they were forced to maintain fixed exchange rates. When the U.S. economy contracted, gold flowed toward the United States, forcing other nations to raise interest rates and deflate their economies to prevent further gold outflows. This forced monetary contraction mirrored the U.S. downturn, leading to widespread declines in output and prices globally.13

Credit Contraction and Financial Panics

In the 1920s, Europe relied heavily on American loans. As U.S. investors shifted their capital toward the booming domestic stock market, international lending collapsed. This credit squeeze left foreign economies vulnerable. When financial crises erupted—most notably the 1931 failure of Austria’s Creditanstalt—the panic spread rapidly across Europe, causing bank failures and further depressing global output.241

Protectionism

The 1930 Smoot-Hawley Tariff Act prompted retaliatory tariffs from other nations. This "beggar-thy-neighbour" approach reduced global trade, exacerbated balance-of-payments problems for commodity-producing countries, and deepened the worldwide economic collapse.524