Bush benefited from the unraveling of Eastern European Communism, a rapid series of events that began with the collapse of East Germany late in 1989 and culminated in the dissolution of the Soviet Union in 1991. To many in the United States these events were a confirmation and a consequence of the anti-Soviet military buildup under Reagan and Bush. In 1991, 1992, and 1993, Bush signed nuclear disarmament agreements with the Soviet Union and then Russia that called for substantial cuts in nuclear arms. In Central America the United States achieved long-standing policy objectives. In Dec., 1989, U.S. forces invaded Panama and removed Gen. Manuel Noriega to stand trial in the United States for drug trafficking and other alleged crimes. Then, in Feb., 1990, the Sandinistas were defeated in elections in Nicaragua. Canada, Mexico, and the United States created a free-trade zone when the North American Free Trade Agreement was signed in 1992.

In the Middle East, the Iraqi invasion of Kuwait on Aug. 2, 1990, provided the occasion for the most striking foreign policy achievement of the Bush administration (see Persian Gulf War). Bush saw the expulsion of Iraqi forces from Kuwait by an American-led international coalition as a test of U.S. resolve to uphold and enforce what he termed the "new world order." The success of Bush's military policy led to unprecedented popularity at home, but the U.S. triumph in the Persian Gulf War was not complete; Saddam Hussein retained power in Iraq. In the aftermath of the Persian Gulf War, under prodding from Bush and Secretary of State James A. Baker, comprehensive Arab-Israeli peace talks began in late 1991.

Bush's handling of domestic affairs was less successful. The savings and loan crisis (see savings and loan association) erupted in the early months of his administration, and the costs to the government only added to concerns about the federal budget deficit. Bush's plan to stimulate the economy by encouraging growth in the private sector included cutting expenditures and taxes, especially the tax on capital gains. After a prolonged battle with the Congress, he agreed (Oct., 1990) to a deficit-reduction bill that included new revenues, thereby breaking his 1988 campaign pledge to not raise taxes. This angered conservatives, but even more damaging to Bush was a prolonged international recession that resulted in stagnant economic growth at home, high levels of unemployment, and increased concern about the ability of the United States to compete with Japan and other nations.

Because of this economic uncertainty, Bush began his 1992 reelection campaign as a far less popular president than he had been after the Gulf War, a short time earlier. Bush and Vice President Quayle were renominated by the Republican party in Aug., 1992. The Democrats nominated Bill Clinton, governor of Arkansas. Businessman H. Ross Perot entered the race as an independent. After a bitter campaign, Clinton won, and Bush retired to Texas. In 2005 Bush joined with his successor to raise funds for victims of the 2004 Indian Ocean tsunami and Hurricane Katrina, and subsequently served as UN special envoy for the South Asian earthquake disaster.