Neither Zachary Taylor nor his secretary of state, John M. Clayton, had had much experience in foreign affairs. As in domestic matters, Taylor was not directly involved in either foreign policy formation or diplomacy. His administration acted to stop an expedition filibustering against Cuba, supported the efforts of German liberals in the revolutions of 1848 in the German states, and engaged in verbal clashes with France and Portugal over various reparation disputes. It also confronted Spain about the arrest of several Americans charged with piracy and assisted England's search for a team of lost British explorers in the Arctic.

Taylor's most important foreign policy move involved delicate negotiations with Britain over American plans to build a canal across Nicaragua. The plan was opposed by the British, who claimed a special status in neighboring Honduras. The resulting treaty, known as the Clayton-Bulwer Treaty, was Taylor's last act of state. It proved to be a landmark agreement. Both sides agreed to renounce control or dominion over any canal that might be built. The treaty effectively weakened U.S. commitment to Manifest Destiny as a formal policy while recognizing the supremacy of U.S. interests in Central America. It was an important step in the development of the Anglo-American alliance that emerged in the second half of the nineteenth century.