And the U.S., via its isolationist policy at the time, largely chose to just stay out of a war which was being fought "way over there" and which we had no direct interest in at the time. But then the Japanese attacked Pearl Harbor in late 1941, which changed everything. This is when IBM's direct involvement with Germany also ended.
Yes Pearl Harbor changed everything, yet nothing changed. Direct dealing would be illegal, so they simply relayed via IBM Geneva. The book made a convincing case that IBM, and Watson himself continued to deal - and profit - throughout the war. "IBM's direct involvement with Germany ended" is pretty academic if they just started funnelling through a subsidiary.
Well, don't forget that the name "Watson" applies to both Watson Sr. (who founded IBM but who had a somewhat less than stellar reputation, at least at first) and his son Watson Jr., who ran IBM himself for a great many years and who had a much better reputation. Apparently father and son didn't really get along too well, though.