In 1793 President Washington issued the Neutrality Proclamation. Its purpose was to keep the United States from being drawn into a war between Britain and France. At that time it was common for a naval power to seize the ships of neutral nations that traded with its enemy, and both Britain and France had seized U.S. ships. Indeed, for years Britain had been antagonizing its former colony by violating the terms of the peace treaty both nations had signed at the end of American Revolution. The British routinely seized American merchant ships in the Atlantic and the Caribbean, wrongfully impressed and imprisoned American sailors, and supplied weapons to Native Americans. Thomas Jefferson was outraged by Britain's actions and called for reprisals, but Alexander Hamilton and other Federalists urged caution. They understood the importance of maintaining trade relations with Britain and the risks of going to war.
In an effort to avoid a war, President Washington sent Chief Justice John Jay to London in 1794 to negotiate a treaty. Jay was unable to win many concessions from Britain. The British agreed to leave their remaining outposts on U.S. soil and to pay for damages to U.S. ships they had seized in the past. However, they would not promise to stop impressing sailors or halt future seizures. Nor would they forgive any of the debt the United States owed British merchants from before the American Revolution.
The alliance between the United States and Britain posed a serious threat to France. Tensions between France and Britain were still present during this period as Britain supported Austria against France in the War of the First Coalition (1792–97). In retaliation, France seized 300 American merchant ships and eventually severed diplomatic relations with the United States. In 1797 President John Adams sent envoys to Paris in the hopes of restoring friendly relations. In what became known as the XYZ Affair, envoys were approached by three Frenchmen, who were referred to only as X, Y, and Z in documents later released to the public. The three men demanded millions of dollars in loans and a bribe of $250,000 as their price for setting up a meeting between the Americans and France's foreign minister. The Americans refused. Back in the United States, when word got out about the XYZ Affair, outraged Americans rallied for war with France. President Adams resisted. He knew a war could have disastrous consequences for the United States, so he took steps to reestablish diplomatic ties. Despite skirmishes between the two nation's navies, France and the United States ended hostilities with the signing of the Convention of 1800.