Sometimes turning points go unrecognized. Likewise, some things that seem like turning points are not.
Christmas Day of 1861 may have been the most dangerous day of the Civil War for the North. There were greater panics in Washington over later events. The emergence of the ironclad CSS Virginia (formerly the USS Merrimack) at Hampton Roads the following March 8 terrified many in the cabinet, though the scale of the threat was grossly exaggerated. Lee's invasion of Pennsylvania, which culminated with his defeat at Gettysburg in 1863, was a similar crisis, and is often seen, erroneously, as the turning point of the War. Neither event posed the kind of threat Lincoln's cabinet grappled with on December 25 and 26, 1861.
The threat on those dates came not from the Confederacy, but from across the Atlantic, and from the blustering of the American political establishment. It is known to history as the Trent Affair. Capt. Charles Wilkes, who was already in violation of his orders, seized Confederate representatives from the British mail packet ship Trent. The Lincoln administration had imprisoned Mason and Slidell, the Confederate diplomats Wilkes had seized. Not only was the arrest a clear violation of international law, and a betrayal of the principles over which the United States had fought the War of 1812 (which had resulted from Royal Navy ships stopping American ships and removing any sailors who appeared to be British subjects to serve in the long wars against France), but it was also a highly popular act of political insanity. Americans in 1861 loved "twisting the lions's tail," but few understood that the recent ironclad revolution made that much more dangerous than in the past.
In 1861, the ironclad was the new super weapon, the stealth bomber of its day, but it was so new that it was extremely rare. While we tend to think of ironclads as quintessentially American, in 1861, both the USA and the CSA had exactly none in commission. Both countries were aware of the need for them, and were feverishly trying to complete one, but only England and France possessed them. In December 1861, Queen Victoria had two in commission, one launched but incomplete, and one building, while Napoleon III had one in commission, and several building or launched but incomplete. It was already assumed that no wooden warship could stand against them. And unlike the soon-to-be-launched Monitor, these were all sea-going vessels with armor superior to anything the US could produce. Finally, since it was clear that Napoleon would declare war if Victoria did, there was no question of breaking a blockade through political maneuvering.
On Christmas day, 1861, Lincoln's cabinet was assembled to consider the response to the British ultimatum. London had intentionally toned down its original response, but many still believed that the administration could not accept it as is. Lincoln initially favored the recommendation of Senator Charles Sumner to submit the matter to arbitration, but the French attitude made that almost impossible. There were still voices for war with Britain in the cabinet, but Secretary of State Seward wanted to release the prisoners and comply with the main British demands. No decision was reached that day, but Lincoln told Seward to bring his best arguments back to the cabinet the next day, while he would draw up the best argument he could make for arbitration. When the cabinet reconvened on the 26th, Lincoln presented no argument to Seward, accepting his position completely, afterward telling him that he had been unable to find a single, satisfactory argument for arbitration. He understood that a request for arbitration would not be acceptable to Britain or France, and that he would be faced with an international as well as a civil war.
Over the course of those two days, American foreign policy grew up, and the possibility of victory in world wars not even imaginable emerged. The future "Special Relationship" between American and Britain was still far off, but relations between the two countries pulled back permanently from the brink of war.
Foreman, Amanda. A World on Fire: Britain’s Crucial Role in the American Civil War, Random House, 2011.
Goodwin, Doris Kearns, Team of Rivals: The Political Genius of Abraham Lincoln, Simon & Schuster, 2005.
Reed, Sir Edward James, Our Iron-Clad Ships: Their Qualities, Performances, and Cost, J. Murray, 1869,
Symonds, Craig L., Lincoln and His Admirals, Oxford, 2008.