"Nevertheless, the United States expected neutral trade rights; that is, it wanted to trade with belligerents on both sides of the war, including Great Britain and Germany. Both of those countries opposed the American policy, but while Great Britain would stop and board U.S. ships suspected of carrying goods to Germany, German submarines took the more dire action of sinking American merchant ships."

http://usforeignpolicy.about.com/od/alliesenemies/a/The-U-S-And-Great-Britain-The-Special-Relationship-In-The-World-Wars.htm

It appears that Germany was already sinking American merchant ships early in the war. Later, in response, America took to using civilians as "human shields," transporting their war supplies on passenger ships in the hope that German subs would not attack.

The Germans began to suspect that this was happening, and their suspicion culminated in their sinking of the Lusitania. I don't know if they had reliable intel which revealed the contents of the ship, so please chime in if anyone can has anything to add.