The trade and industry secretary has warned the Bush administration not to impose tariffs on imports of British steel.

With president Bush deciding this week whether he will support action to protect American steel companies, Patricia Hewitt is set to back EU trade commissioner Pascal Lamy who has warned that Europe could retaliate against US interests.

UK companies including Corus have warned that cuts in imports to the US could result in more "dumping" in Europe.

"We cannot allow the EU and the UK industry to be swamped by backwash. So we defend our right to consider options to prevent serious injury to the industry, including...possible safeguard measures," Hewitt said.

But the backing for EU action is set to refocus attention on the "steelgate" scandal, which led to government embarrassment over a donation of £125,000 to Labour Party funds from Lakshmi Mittal.

Mittal's US-based company had lobbied for the tariffs to be imposed on British imports, while at the same time Tony Blair was backing Mittal's purchase of a Romanian steelworks.

US politics

President Bush faces a tough choice on the steel tariffs.

While he campaigned on a free trade platform, he also promised not to forget workers in the steel industry, who's votes could tip the balance in up-coming congressional elections.

In the last three years, 31 US steel companies have filed for bankruptcy protection and more are at risk.

The tens of thousand of votes involved in the industry could swing up to six key seats in the industrial Midwest in the 2002 elections to the House of Representatives, potentially costing Bush's Republican Party control.

The president is considering proposals to impose a combination of import quotas and tariffs ranging from 15 per cent to 40 per cent, depending on the type of steel.

But while steel-makers lobbied for government action, other domestic companies began warning of the dangers of tariffs.

Steel-consuming industries, such as in the aeroplane and automobile parts sector, have warned of the dangers of US steel prices rising by up to 10 per cent. And port workers have also joined the campaign against tariffs on steel imports.

Administration aides have indicated that a compromise is possible, but no final decision has yet been made.