Steel tariffs have raised costs for US industry

EU trade commissioner Pascal Lamy said punitive tariffs on a range of US imports could be in place by the middle of next month in the event of a favourable ruling.

"If the US does not move, retaliation is a racing certainty in mid-December," he said.

The WTO is due on Monday to deliver its verdict on an appeal against its original ruling that the US steel tariffs breach international trade rules.

President George W. Bush's government imposed tariffs of up to 30% on steel imports in January last year in an effort to protect domestic producers from tough foreign competition.

Trade spat

The US said the tariffs were a temporary measure designed to give its beleaguered steel industry a chance to restructure, and were therefore consistent with WTO rules.

But the move provoked howls of protest from steel exporting nations worldwide.

The EU, whose own steel industry had already undergone a painful reorganisation, was particularly incensed.

The WTO ruled in the EU's favour in May this year.

The EU has drawn up a hit list of US imports worth about $2.2bn a year which will targeted with retaliatory sanctions.

Backlash

The list, which includes Harley Davidson motorcycles, citrus fruits, and textile products, is said to have been calculated so as to hit regions which support President Bush's Republican party hardest.

Mr Lamy added that the EU would impose tariffs on a further $4bn worth of US imports if Washington did not repeal tax breaks for exporters which have also been declared illegal by the WTO.

The US government is currently considering whether to extend its steel import tariffs to March 2005.

It is coming under heavy pressure to do so from steel producing states such as West Virginia and Ohio.