On this day in 1917, President Woodrow Wilson speaks for two hours before a historic session of Congress to announce that the United States is breaking diplomatic relations with Germany.
Due to the reintroduction of the German navy's policy of unlimited submarine warfare, announced two days earlier by Chancellor Theobald von Bethmann Hollwegg, Wilson announced that his government had no choice but to cut all diplomatic ties with Germany in order to uphold the honor and dignity of the United States. Though he maintained that We do not desire any hostile conflict with the German government, Wilson nevertheless cautioned that war would follow if Germany followed through on its threat to sink American ships without warning.
Later that day, Count von Bernstorff, the German ambassador to the U.S., received a note written by Secretary of State Robert Lansing stating that The President hasdirected me to announce to your Excellency that all diplomatic relations between the United States and the German empire are severed, and that the American Ambassador at Berlin will be immediately withdrawn, and in accordance with such announcement to deliver to your Excellency your passports. Bernstorff was guaranteed safe passage out of the country, but was ordered to leave Washington immediately. Also in the wake of Wilson's speech, all German cruisers docked in the United States were seized and the government formally demanded that all American prisoners being held in Germany be released at once.
On the same day, a German U-boat sunk the American cargo ship Housatonic off the Scilly Islands, just southwest of Britain. A British ship rescued the ship's crew, but its entire cargo of grain was lost.
In Berlin that night, before learning of the president's speech, German Foreign Secretary Arthur Zimmermann told U.S. Ambassador James J. Gerard that Everything will be alright. America will do nothing, for President Wilson is for peace and nothing else. Everything will go on as before. He was proved wrong the following morning, as news arrived of the break in relations between America and Germany, a decisive step towards U.S. entry into the First World War.
Taken from: http://www.history.com/this-day-in-history/us-breaks-diplomatic-relations-with-germany [03.02.2015]