President Bush has bowed to international pressure by announcing an end to US steel tariffs.

The policy - dubbed as "safeguard measures" by the White House - had been deemed illegal by the World Trade Organisation and threatened to provoke retaliatory moves by the EU.

Bush said the decision was "based upon my strong belief that America's consumers, the American economy is better off with a world that trades freely and a world that trades fairly".

The US administration is also set to announce a u-turn in its opposition to NATO taking on a key role in Iraq.

Secretary of state Colin Powell said the transatlantic alliance could take over one of four military zones early next year.

The abrupt about turn led to fresh speculation that Washington is looking for an exit strategy from Iraq.