Bush Weighs Whether to Repeal Steel Tariffs

President Bush is heading to Pittsburgh Tuesday to cash in at a $1 million fund-raiser, just as producers of steel — a major industry in Pennsylvania — are waiting to hear whether the president will defy international trade agreements and maintain steel tariffs on foreign-made steel.

But steel consumers, who were hard hit by the slumping economy and a hike in steel prices as a result of the tariffs, were present Monday when the president attended a $750,000 fund-raiser in Michigan, another crucial battleground state in the 2004 election.

While the White House said publicly that a decision whether to repeal steel tariffs deemed illegal by the World Trade Organization (search) has not yet been made, senior Bush advisers say several key aides and agencies, including the office of the U.S. trade representative, are recommending that Bush roll back the tariffs on foreign steel to avoid a global trade war.

A small number of tariffs — first imposed in March 2002 — might be left in place on specialty steel products, according to an industry official who has held discussions with key members of the administration. But he said that was beginning to look less and less likely.

Asked if the tariffs would be lifted, the industry official said, "Absolutely, that is for sure."

The White House has not given any indication of the president's plan.

"The president — you've heard him talk about why he imposed these safeguards in the first place, and that was to help give the industry an opportunity to restructure, consolidate," said White House Press Secretary Scott McClellan. "And he'll make a decision based on what he believes is the right decision for the American people."

The WTO reaffirmed its ruling last month that the United States is in violation of global trade rules by imposing tariffs — set to expire in March 2005 — on foreign-made steel. Domestic steel producers say foreign steel has flooded the U.S. market, making it more difficult for the declining steel industry to update its production methods and technology.

Bush was expected to make a decision before the WTO's dispute settlement body meets Dec. 10. If the tariffs are still in place by then, the European Union, Norway and Japan have said they may retaliate.

The 15-nation European Union renewed its threat Monday, saying that it will slap $2.2 billion in sanctions on U.S. exports if U.S. steel tariffs are not completely abolished by Dec. 15.

"The U.S. knows this," said EU spokeswoman Arancha Gonzalez, speaking in Brussels.

The senior Bush official, who spoke on the condition of anonymity, said the threat of retaliation by the European Union tipped the balance.

"The EU gets what it wanted," he said.

The president's decision will likely be influenced by domestic priorities as well. Pennsylvania, Ohio and West Virginia all contain traditionally Democratic steelworkers who were pleased by Bush's decision to impose tariffs. Michigan, Minnesota and Wisconsin contain small business owners and manufacturing companies who say they have been hurt by the tariffs.

Bush attended a fund-raiser on Monday in Dearborn, Mich., a suburb of Detroit, where auto-parts manufacturers say the tariffs have hiked steel prices. The president was also discussing the economy at steel-consuming Dynamic Metal Treating in Canton, Mich.

If the tariffs remain in place, steel consumers are likely to face a supply shortage, said Lew Leibowitz, attorney for the Consuming Industries Trade Action Coalition (search). CITAC opposes the tariffs.

"I can't find anyone who believes that the tariffs are going to be continued," said Leibowitz, who predicted the White House would announce its decision this week. "We're beginning to get a little optimistic."

But the president's $1 million fund-raiser on Tuesday, in Pittsburgh, America's "Steel City," is being co-hosted by U.S. Steel (search) Chairman and CEO Thomas J. Usher.

U.S. Steel senior vice president Terrence Straub predicted that repealing the tariffs could cost Bush a winning margin in Pennsylvania — a state he narrowly lost in 2000. Tuesday's visit marks the 23rd time Bush has visited the state since taking office. 

"They don't need but a handful of votes," Straub said. "If he lifts the relief, he forsakes that; he's walked away, he's squandered that opportunity. This would be, in our view, a broken promise by the White House."

The six states at the heart of the battle make up about one-third of the 270 electoral votes needed to win re-election, but the president may also find that a possible trade war with the EU could hurt other states he is counting on, for instance, Florida, which is a top exporter of citrus.

"The last thing our economy needs right now is a trade war, and that's exactly what we would have gotten had the steel tariffs remained in place," said Rep. Jeff Flake, R-Ariz., a free trade supporter who wants the president to repeal the tariffs. "These steel tariffs were a glaring inconsistency in what is an otherwise very pro-free trade White House, and I'm glad they're gone."

The White House said the matter is still being discussed with domestic steel producers, consumers and members of Congress, but a call to the Bush-Cheney re-election campaign gleaned a line or two that may give credence to expectations that the tariffs will be repealed.

According to a Bush-Cheney '04 campaign official, Pennsylvania will continue to be a competitive state, but steel may not be the critical issue for Pennsylvanians.

"There are more people in Pennsylvania these days employed at Wal-Mart than in the steel industry," the campaign official told Fox News.

"Pennsylvanians have moved on" from the days of steel as a transforming industry in this country, the official said.

"It's a very big decision for the president from the political standpoint," said Bill Green, a Pittsburgh-based Republican political consultant. "I understand the WTO pressure. But it's at least 60 electoral votes involved. That has to weigh heavily on this president."

The campaign official told Fox News that Bush would discuss a "broader agenda" during his trip to Pittsburgh, including defense and Medicare.

Fox News' Trish Turner and The Associated Press contributed to this report.