The World Trade Organization (WTO) today confirmed that hefty US steel import duties violate trade rules.
The decision piles pressure on Washington to withdraw them, according to diplomats.
They said the WTO's Appellate Body, its highest trade court, had upheld the main thrust of an earlier decision in July by a panel of trade judges, although they made some changes.
In response to the trade court decision, US President George W. Bush must quickly withdraw the tariffs or face retaliation from the European Union, which is threatening to hit back with some $2.2 billion in duties on US goods.
The EU was one of a number of countries - including Japan, Brazil, South Korea and Switzerland - to file a complaint with the Geneva-based WTO over the steel duties, introduced in March 2002 to protect the struggling US steel industry.