When a Serbian nationalist shot Austro-Hungarian Archduke Franz Ferdinand in Sarajevo on June 28, 1914, the crisis that followed pulled nearly every major European power into war within six weeks. President Woodrow Wilson asked Americans to remain "impartial in thought as well as in action." That request made sense on the surface — the United States had no alliance obligations, no territorial stake in the Balkans, and a long tradition of staying out of European quarrels. But neutrality, the formal policy of not taking sides in another nation's conflict, proved far harder to maintain than Wilson hoped.

The practical problem was commerce. Britain and France were major trading partners, and as the war expanded, American banks loaned those governments enormous sums to buy food, steel, and munitions. By 1917 U.S. loans to the Allied powers totaled roughly $2.3 billion, compared to just $27 million to Germany. A common mistake is to assume this lending was secretly pro-war — in fact, the Wilson administration initially discouraged it. But economic pressure won out: cutting off trade and credit would have thrown the American economy into recession. The result was a financial and material connection to the Allied cause that made true neutrality increasingly fictional, even if the United States remained formally at peace.

The Submarine Crisis

Germany's response to British naval dominance created the sharpest threat to American neutrality. Britain used its surface fleet to blockade German ports, strangling imports. Germany retaliated with submarine warfare — attacks by U-boats (undersea boats) on ships supplying Britain. In February 1915, Germany declared the waters around the British Isles a war zone and warned that neutral ships entering it did so at their own risk.

This put the United States in a bind. Under established international law, a warship had to stop and search a vessel before sinking it, and had to provide for the safety of passengers and crew. Submarines could not do this without surfacing and losing the advantage of stealth. Wilson insisted that American citizens had the legal right to travel on the seas and that Germany must respect it. Germany argued, not entirely without reason, that Britain's blockade was also a violation of neutral rights — but Wilson applied the standards unevenly, partly because German tactics killed people in dramatic, visible ways while the British blockade caused harm more slowly.

The crisis became acute on May 7, 1915, when a German U-boat sank the Lusitania, a British ocean liner, off the Irish coast. Nearly 1,200 people died, including 128 Americans. Public outrage was immediate. Wilson sent a series of sharp diplomatic protests demanding that Germany stop attacking passenger ships without warning. Germany's response — that the Lusitania had been carrying contraband munitions (a claim that was partly true but legally contested) — satisfied no one in Washington.