If that happens, that would be big trouble for the United States. If Germany is neutralized in a contained European war, the U.S. would essentially be right back to where they were in 1881: geopolitically isolated, without any major allies, and encircled by enemies. This time around, the USA would be a much stronger military power than it was in the Second Mexican War, sure. But it would also be stretched thin by the Canadian occupation and the Mormon uprisings.
This would be a strategic coup for Knight's CSA and the Entente: if they wait to have one war at a time, they'd get their revenge on Germany, and then have the opportunity to take down the USA. The Confederacy might still be itching for revenge itself, while the British will be tempted by the chance to liberate Canada. The only ally the US would have would be Quebec, but that wouldn't do much good against the combined power of the CSA, Britain, and, no doubt, Canadian rebels. Japan might get in on the action too, seizing the opportunity to finally snatch away the Sandwich Islands while the United States is fighting for its survival.
Staying neutral would be a great geopolitical blunder on Al Smith's part that, if it happens, would be looked down on for years as one of history's greatest mistakes. Hopefully, Smith would realize that the short-term political approval ratings of keeping the country out of one war would be far outweighed by the need to maintain its long-term survival.