US President George W. Bush scrapped tariffs on steel imports today months ahead of schedule.
The move is seen as an effort to avert retaliation from Europe and Asia but it risks a political backlash in battleground states in next year's presidential election.
The White House said Mr Bush will, however, keep in place a system that helps US steel producers by licensing and tracking steel imports to cut the risk of unexpected surges.
Mr Bush's decision comes less than a month after the World Trade Organisation's highest court ruled that the tariffs violated global trade laws, and just before the European Union planned to launch sanctions against $2.2 billion in US goods, including politically sensitive products such as citrus from Florida and textiles from the Carolinas.
European trade chief Mr Pascal Lamy said the US decision showed global trade rules worked, which was also good for business confidence.
"I think it is a test case that WTO disciplines are working and that when you have a rules-based system these rules can be litigated and at the end of the day the right thing can be done because of the system of rules," he said.
"So I think it is a factor of confidence for business, it's a factor of confidence for investors which goes in the right direction," he added when asked what impact the US decision would have on the global economy.