Banning trade with the Entente might be a little much. I would think that a shift to true neutrality is more realistic. No further credits for France and Britain. Everything they want to buy has to be paid for in hard currency, up-front.
basically as OTL, all loan till 1917 were secured by the British and French (and there will more money due to not financing Italy war effort) and Wilson throwing the Entente and getting chumming with the Kaiser and co. is difficult due to him being more an anglophile and wary of prussian militarism.
He will simply stop loan once the Entente don't have the mean to secure them but will also not sell too much to the CP; plus if there is no USW the supply situation of the Entente will be better and this will also mean less money spent in the USA and so more financial authonomy.
Frankly a victory of Hughes and the USA going true neutral will cause more or less the same effect, but this will also mean that the UK will not spent at the end of the war like OTL and while Germany will have the possibility to give France the Septemberprogram treatment, the same will not possible for Great Britain (frankly in any case a white peace is the max possibility) and a more conditional treaty will be needed
Thanks for your insights regarding arms trade. Here's something: the British control Gibraltar, so why wouldn't they cut off American shipments to Italy at that point?
Italy as neutral will have some limit at what she will can import, sure it will not like Norway and Netherlands as she is a great power and have more leeway and London can look the other way to some 'under the table' commerce if it's not too evident and limited.
Once the war start, Italy will be better have some increase of national production of coal (as OTL) and lot of reserve of coal and food as the British controlling Gibraltar and Suez will stop them.
I know the “Austrians give territory to Rome” line is a popular one, but I really don’t think that would swing Italy into the war. They’re far too dependant on WAllied (British) capital to cut that link with a DoW.
Why would Italy going CP result in the US cutting off the WAllies financially?
War? No, but keep them neutral while being favorable towards the CP? Yes. Maybe Italy will try something if she see that the Entente is on the rope, but it's more probable than not as frankly it will need lot of discussion about italian compensation in this case and wien will not desire Italy getting too much or poaching in her turf. Remain neutral it's the most probable outcome