In The Hobbit, how does the complicating incident of Bilbo's encounter with Smaug affect his relationship with the dwarves? It weakens his relationship with the dwarves. Bilbo realizes that the dwarves have been using him, and that he would be better off on his own.

It strengthens his relationship with the dwarves. After Thorin risks his life to save Bilbo from Smaug's flames, Bilbo finally feels like a part of the group.

It complicates his relationship with the dwarves. He no longer trusts the trolls, which leads him to trade the Arkenstone and be expelled from the group.

It does nothing to change his relationship with the dwarves. Smaug tries to trick Bilbo into leaving the dwarves behind, but Bilbo recognizes Smaug's lies.