The disaster immediately strained relations between Germany and the neutral United States, fueled anti-German sentiment and set off a chain of events that eventually led to the United States entering World War I. Germany broke naval rules.
As I am thinking you mean "Producers" when you say "Sellers" I am going to go with, Yes. You are correct it is Supply. (Also the other one is called Demand not price)
It would be the term "militarism" that refers to a nation's tendency to expand its armed forces and acquire new and better weapons, since in this case the nation in question is expanding its military capabilities.