President Taft was more committed to the expansion of U.S. foreign trade than was Roosevelt. He pursued a program, known as "dollar diplomacy," designed to encourage U.S. investments in South and Central American, the Caribbean, and the Far East. To implement this foreign policy agenda, Taft used government officials to promote the sale of American products overseas, particularly heavy industrial goods and military hardware. In Taft's conception of foreign policy, the U.S. military was a tool of economic diplomacy. He invited U.S. banks to rescue debt-ridden Honduras with loans and grants, and he sent 2,700 U.S. marines to stabilize Nicaragua's conservative, pro-U.S. regime when rebels threatened to overthrow its government.

Taft's effort at designing a new look for U.S. foreign policy was generally unsuccessful. United States trade with China actually declined under Taft. Additionally, his program aimed at seeking commercial advantages in Central America aggravated the existing ill will that had been generated by Roosevelt's military interventions in Panama and Santa Domingo. (See Roosevelt's biography, foreign affairs section, for further details.) The bad relations between the United States and other American nations to the south resulted in the convening of a Pan-American Conference. This conference was intent on finding ways to curtail U.S. commercial penetration, influence, and intervention. When Taft ordered two thousand troops to the Mexican border to stand ready to intervene in revolutionary-torn Mexico to protect U.S. investments, Congress offered stiff opposition. Taft then backed off (earning the nickname "Peaceful Bill"), leaving the situation in Mexico for his successor to handle.