Bush ready to drop steel tariffs

As President Bush moved towards lifting US steel import tariffs, the European Union declared yesterday that the illegal measures must be rescinded in their entirety if America is to avoid retaliatory sanctions.

The warning, issued by an EU spokeswoman in Brussels, comes amid reports in Washington that the White House has decided to drop most of the tariffs. US officials said last night that various options were under review and no decision had been taken. They did not dispute that the tariffs, which have major domestic political implications for Mr Bush, are likely to be discarded.

The EU warned that partial compliance with the World Trade Organisation ruling against the tariffs would not be enough and unless the tariffs, imposed in March 2002, went in their entirety, it would hit back with $2.2bn of sanctions on imports from the US. "The US knows this," the EU spokeswoman said.

A final American decision is expected before the 15 December deadline imposed by the WTO. There was some surprise among White House-watchers that the administration did not use the Thanksgiving holiday to make the announcement with as little impact as possible.

The likelihood now is that it will come today, after Mr Bush has completed visits to Pennsylvania and Michigan, states where the steel issue especially resonates and both of them top targets for the Republicans for the 2004 election.

In the past 10 days, senior US officials have been preparing the ground for a climb-down, arguing that the sanctions have had their desired effect by enabling the steel industry to re-organise. The gathering economic recovery also makes them less necessary than when they were imposed.

The political impact of their removal is far from clear-cut. Such a move may cost Mr Bush votes in steel manufacturing states such as Ohio and Pennsylvania. But the tariffs have pushed up costs for major industries that consume steel, such as automobiles, hurting the Republican cause in some mid-Western states.

Today, the President attends a fundraiser in Pittsburgh, Pennsylvania, co-hosted by Thomas Usher, the CEO of US Steel. In 2000, Mr Bush came within 5 points of Al Gore in once solidly-Democratic Pennsylvania, and he has visited the state more than 20 times since entering the White House.