Despite his stated preference for moral diplomacy, Wilson preserved the U.S. sphere of influence in the Caribbean using much the same methods as had Roosevelt and Taft. To protect U.S. investments, the president sent marines to Haiti in 1915, to the Dominican Republic in 1916, and to Cuba in 1917.

The most serious challenge to Wilson’s diplomacy came in Mexico. The Mexican revolution in 1911 spawned a civil war among various insurgent factions. The resulting instability threatened U.S. interests in Mexico, particularly oil. When Mexicans refused to accept Wilson’s demands to install leaders he considered “good men,” Wilson withdrew diplomatic recognition from Mexico. In a disastrous attempt to influence Mexican politics, Wilson sent the U.S. navy to the port of Veracruz on April 22, 1914, leading to a bloody clash that killed 19 Americans and 126 Mexicans. The situation worsened after Wilson first supported and then turned against one of the rebel competitors for power in Mexico, General Francisco “Pancho” Villa. In response to this betrayal, Villa and 1,500 troops rode across the border and attacked the town of Columbus, New Mexico. In July 1916, Wilson ordered General John Pershing to send 10,000 army troops into Mexico in an attempt to capture Villa. The operation was a complete failure that only further angered Mexican leaders and confirmed their sense that Wilson had no respect for Mexican sovereignty.

At the same time as the situation in Mexico was deteriorating, a much more serious problem was developing in Europe. On June 28, 1914, a Serbian nationalist, intending to strike a blow against Austria-Hungary, assassinated the Austrian archduke Franz Ferdinand in Sarajevo, the capital of the province of Bosnia. This terrorist attack plunged Europe into what would become a world war. On August 4, 1914, the Central Powers—Germany, the Ottoman empire, and Austria-Hungary—officially declared war against the Allies—Great Britain, France, and Russia. (Italy joined the Allies in 1915.)

For the first three years of the Great War, Wilson kept the United States neutral, though privately he supported the British. Nevertheless, the president urged Americans to remain “impartial in thought as well as action.” Peace activists sought to keep Wilson to his word. In 1915 women reformers and suffragists such as Jane Addams and Carrie Chapman Catt organized the Women’s Peace Party to keep the United States out of the war.

Wilson faced two key problems in maintaining neutrality. First, the United States had closer and more important economic ties with the Allies than with the Central Powers, a disparity that would only grow as the war went on. The Allies purchased more than $750 million in U.S. goods in 1914, a figure that quadrupled over the next three years. By contrast, the Germans bought approximately $350 million worth of U.S. products in 1914; by 1917 the figure had shrunk to $30 million. Moreover, when the Allies did not have the funds to pay for U.S. goods, they sought loans from private bankers. Initially, the Wilson administration resisted such requests. In 1915, however, Wilson reversed course. Concerned that failure to keep up the prewar level of commerce with the Allies would hurt the country economically, the president authorized private loans. The gap in financial transactions with the rival war powers grew even wider; by 1917 U.S. bankers had loaned the Allies $2.2 billion, compared with just $27 million to Germany.

The second problem facing Wilson arose from Great Britain’s and Germany’s differing war strategies. As the superior naval power, Britain established a blockade of the North Sea to quarantine Germany and starve it into submission. The British navy violated international law by mining the waters to bottle up the German fleet and keep foreign ships from supplying Germany with food and medicines. Although Wilson protested this treatment, he did so weakly. He believed that the British could pay compensation for such violations of international law after the war.

Confronting a strangling blockade, Germany depended on the newly developed U-boat (Unterseeboot, or submarine) to counter the British navy. In February 1915, Germany declared a blockade of the British Isles and warned citizens of neutral nations to stay off British ships in the area. U-boats, which were lighter and sleeker than British battleships and merchant marine ships, relied on surprise. This strategy violated the rules of engagement under international maritime law, which required belligerent ships to allow civilians to leave passenger liners and cargo ships before firing. The British complicated the situation for the Germans by flying flags of neutral countries on merchant vessels and arming them with small “defensive” weapons. If U-boats played by the rules and surfaced before inspecting merchant ships, they risked being blown out of the water by disguised enemy guns.

Under these circumstances, U.S. neutrality could not last long. On May 15, 1915, catastrophe struck. Without surfacing and identifying itself, a German submarine off the Irish coast attacked the British luxury liner Lusitania, which had departed from New York City en route to England. Although the ship’s stated objective was to provide passengers with transport, its cargo contained a large supply of ammunition for British weapons. The U-boat’s torpedoes rapidly sank the ship, killing 1,198 people, including 128 Americans.

Outraged Americans called on the president to respond; some, including Theodore Roosevelt, advocated the immediate use of military force. Despite his pro-British sentiments, Wilson resisted going to war. Instead, he held the Germans in “strict accountability” for their action. Wilson demanded that Germany refrain from further attacks against passenger liners and offer a financial settlement to the Lusitania’s survivors. Unwilling to risk war with the United States, the Germans consented.

Wilson had only delayed the United States’ entry into the war. By pursuing a policy of neutrality that treated the combatants unequally and by insisting that Americans had a right to travel on the ships of belligerent nations, the president diminished the chance that the United States would stay out of the war.

Throughout 1916, Wilson pursued two separate but interrelated policies that embodied the ambivalence that he and the U.S. people shared about the war. On the one hand, with Germany alternating between continued U-boat attacks and apologies, the president sought to build the country’s military preparedness in the event of war. He signed into law the National Defense Act, which increased the size of the army, navy, and National Guard. On the other hand, Wilson stressed his desire to remain neutral and stay out of the war. With U.S. public opinion divided on the Great War, Wilson chose to run for reelection as a peace candidate. The Democrats adopted the slogan “He kept us out of war” and also emphasized the president’s substantial record of progressive reform. Wilson won a narrow victory against Charles Evans Hughes, the former governor of New York, who wavered between advocating peace and criticizing Wilson for not sufficiently supporting the Allies.