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They were in an arms race, each trying to build more and better battleships, afraid that the other would gain naval superiority. Unrestricted U-boat warfare led to the sinking of the Lusitania, causing Congress to declare war on Germany.

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Mainly, the US was neutral from 1914 until April 1917. Unlike World War II, the US didn't strongly favor one side or the other, at least initially. Britain, whenever it goes to war, their strategy is always the same- total naval blockade of the enemy country. Which means even neutral US ships get stopped. It became a problem during the war and there were even rumblings of joining the war against Britain because of it (there is precedent too- the War of 1812 between the US and Britain started for similar reasons).

Germany on the other hand, had a smaller navy than Britain and had to rely more on submarines. They practiced "unrestricted submarine warfare"- that is, if a submarine found a ship, they could sink it without warning. In olden days, it was considered good practice, when attacking a ship that wasn't a warship, to find out what it was, make sure the crew was safely in lifeboats, and then sink it. It wasn't feasible for the Germans to keep doing that against the huge British Navy, so they stopped.

The US protested against Germans sinking their ships or ships carrying Americans, and for a while after the sinking of RMS Lusitania (which later was discovered to have been in fact carrying war materiel) the Germans stopped. But in 1917, they started up again and this was one of the major factors leading to US entry into the war.

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Q: How British and German naval policies eventually draw the us in to World War 1?
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