During the fifteenth century England's international (which meant European) position had declined. This was due to her internal problems. Edward IV had ambitions for French lands, and even the French crown. But where England had declined in this period, France had grown.
The main powers at this time were:
Not a major power but a concern:
As you will see in the following sections Henry followed a defensive foreign policy.
The French King had offered assistance in 1485, and so Henry must have felt some sort of debt towards him.
The big crisis of the reign with regard to France was Charles VIII's invasion of Brittany. Henry had been in exile in Brittany in his youth, and he was close with the Duke of Brittany. It was also an area of France that still had independence from the vastly growing French state.
Henry felt that he had to take some action, to show the other European powers that he was a force to be reckoned with, as a show of support to Anne, the Duchess of Brittany, and as a show of power to Charles. Yet, he had to do all of this without losing face, losing the battle, or spending huge amounts of money. So Henry played a clever card. He invaded France in the October of 1492 with a limited number of troops (many of which were provided by Anne), and he did so late on in the year, demonstrating that he did not have a long and drawn out campaign in mind.
It paid off. Charles, eager to invade Italy, sought peace, which resulted in the Treaty of Etaples. He agreed to pay Henry a pension of 745 000 gold crowns, and swore not to support any rebels like Warbeck or the de la Poles. Henry did well to show strength out of a very weak position.
Burgundy was England's enemy, and yet at the same time trade with the Low Countries (Flanders, Belgium and the Netherlands) was crucial to England's commercial development. The Burgundy family had ties with the Yorkist family, and was eager to see Yorkists returned to the throne. For this reason they supported the de la Poles and the rising of Perkin Warbeck. Perkin was accepted by Maximilian as Richard IV, and in return Warbeck declared Maximilian as heir to the English throne!
However, there were no invasions as Henry imposed economic sanctions on Maximilian rather than military action. Not long after, in 1496, Maximilian was forced to retract and sign the Magnus Intercurcus.
From this point onwards Burgundy was in a state of decline, and relations between the two countries improved. In 1506 Philip of Burgundy handed over the Duke of Suffolk (Edmund de la Pole).
Spain had been united in 1479 by the marriage of Isabella of Castille to Ferdinand of Aragon. The two countries, England and Spain shared suspicions about the rising power of the French Kingdom. They tried to use one another to counter-balance France. Their alliance was cemented in 1501 with the marriage of Henry's eldest son, and heir to the throne, Arthur, to Catherine, the daughter of Ferdinand and Isabella. This was a clear acceptance of Henry as a major figure in European politics.
But then disaster struck. In 1502 Arthur died. This raised issues about the continuation of the Tudor dynasty (another son, Edmund, had died in 1500). There remained Henry, a boy of eleven. Quickly, Henry proposed his only remaining son for the match. However, the diplomatic situation had changed, France and Spain were at peace. Ferdinand demanded better terms for the marriage. By the following year relations between the two countries were in a state of decline. But then the tables turned again, and this time it was Henry who was able to demand more from the union. Henry arranged that Spain, the Netherlands and England should unite in a strong anti-French alliance.
Traditionally, this was England's enemy. Since 1328 the two had been at war. Henry, wishing to reduce the spending on military affairs, sought a peace treaty with Scotland, which resulted in a seven-year truce signed with James III. Unfortunately, James was murdered soon afterwards, and Henry was to find relations with James IV more difficult.
James IV welcomed Perkin Warbeck into his court, recognising his claim to the throne, and even marrying him to a rich Scottish heiress. Scotland sought support from England's other enemy, Burgundy. This alliance meant that if the two countries decided to invade Henry would have to send forces to the south and to the north. If it happened, this would be a very expensive war.
In 1497, Henry was in a position to renew the truce with Scotland, and James agreed to give up Perkin Warbeck.
By 1502 relations had improved so much that a full treaty was signed. A union that was later confirmed by the marriage of Margaret, Henry's daughter, to James.
Both the rebellions of Lambert Simnel and Perkin Warbeck had started in Ireland. Henry felt that the province had been treated too lightly, and sent over the Earl of Kildare to rule the Pale in his name. (The Pale is modern day Dublin.)
R.B. Wernham sums up Henry's foreign policy thus,