The XYZ Affair was the starting point for what was called the Quasi-War between America and France, which led to the formation of the Navy Department and the Marine Corps. The treaties that were previously held between France and the United States were torn up, including the ones that covered commerce as well as peace.
This situation also was important because of the introduction of the Alien and Sedition Acts. These acts allowed people to be imprisoned and fined for something as simple as speaking badly of the American government or the President. The acts were highly unpopular with the people and were a key part of what lead to John Adams not being reelected as president.