The US could next month be hit with the largest sanctions in the history of the World Trade Organisation (WTO), following a final ruling yesterday that Washington had violated international trade rules by imposing tariffs on steel imports last year.

Mr Pascal Lamy, the European Union Trade Commissioner, said the EU would slap tariffs of 8-30 per cent on $2.2 billion (€1.9 billion) worth of US imports beginning on December 15th unless the US removed the steel tariffs. The additional duties would amount to €600-€700 million a year.

"The question is now in the hands of the US president," said a spokeswoman for Mr Lamy. "The US president has the authority to terminate this measure and half of the world is asking him to do that."

The case was brought by the EU, Japan, South Korea, China, Switzerland, Norway, New Zealand and Brazil, which said in a joint statement that the verdict "leaves the US with no other choice but to terminate its WTO-incompatible safeguard measures without delay".

Japan has said it is also prepared to levy trade sanctions against the US.

The decision by the WTO's appeals body upheld an earlier finding that the US tariffs imposed on some steel imports in March 2002 violated world trade rules.

These required Washington to demonstrate that it was responding to an unexpected surge in imported steel that had damaged US steel companies.

The firm deadline set by the EU confronts the administration of President George W. Bush with the most difficult decision yet faced by the US as a result of a negative WTO ruling.

If he removes the tariffs, he could face a backlash from steel producers and unions who say they were promised three years of import protection to help put the industry back on its feet. That could hurt the president in electoral swing states such as West Virginia, Pennsylvania and Ohio.

But if he leaves the measures in place, the EU has said it will impose sanctions on products that could also hurt Mr Bush politically, including fruit and vegetables from Florida.

Washington's initial response gave little sign that it was prepared to remove the tariffs.

Mr Richard Mills, a spokesman for the US Trade Representative's office, said the US still believed the steel tariffs were legal and said it disagreed with the ruling.

Steel-using industries urged Mr Bush to rescind the tariffs, saying the additional costs had hurt US manufacturers. But steel producers and unions condemned the EU decision.   - (Financial Times Service)