Bush steel tariff gamble could spark trade war

US President George W Bush is taking a risky gamble with the US economy in betting that a three-year tariff on steel imports …

US President George W Bush is taking a risky gamble with the US economy in betting that a three-year tariff on steel imports will give US steel manufacturers time to reorganise their ailing industry, experts say.

Economist Mr Robert W Crandall, of the Brookings Institution, warned the tariffs were a damaging blow that could delay the US economic recovery and cause massive lay-offs at steel-using firms. They could also spark a trade war, Mr Crandall said.

The 30 per cent tariff in steel imports approved by Mr Bush is likely to send the price of steel up sharply and raise prices by as much as 10 per cent on important consumer goods here, such as appliances, automobiles and housing.

That has raised immediate criticism. "There are thousands of small-business owners across the country who depend on steel, who are wondering what happened to the open-trade, no-taxes-over-my-dead-body president they thought they elected," said Mr Jon Jenson, chairman of the Consuming Industries Trade Action Coalition, which campaigned against the increase.

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There was much speculation that Mr Bush's action had serious electoral motives. Mr Bush courted steelworkers in the 2000 election campaign, promising to bail out the industry after the Clinton administration did not.

Political experts say steel could play a major role in November in as many as six Congressional races, meaning it could determine control of the closely divided chamber. Much of the steel industry is concentrated in states crucial to winning the White House. Mr Bush lost Michigan, New York and Pennsylvania and narrowly carried Ohio and West Virginia in 2000. Also, some 300,000 retired steelworkers live in Florida.

"Political considerations have influenced this decision very heavily," Mr Jenson said. "Certainly the economic data point the other way." Steel prices are at a 20-year low, and more than 30 US steel mills have filed for bankruptcy protection since the end of 1997.

Mr Bush defended his actions in a terse statement; "We're a free-trading nation, and in order to remain a free-trading nation, we must enforce law," Mr Bush said on Tuesday. "And that's exactly what I did. I decided that imports were severely affecting ... an important industry", steelworkers, whose companies have gone bankrupt.

The plan takes effect on March 20th, and the tariffs and quotas it levies will be eased each year.

Predictably, the move was hailed by the steel industry. US Steel chairman Mr Thomas J Usher likened Bush's decision to a glass that's 95 per cent full. "My hat's off to the president for demonstrating strong leadership," he said.

Weirton Steel president Mr John H Walker called it "the first bold steps to control the import crisis".