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The Bush administration has decided to repeal its 20-month-old tariffs on imported steel to head off a trade war that would have included foreign retaliation against products from politically crucial U.S. states, The Washington Post reported.

Quoting administration and industry sources, the newspaper said in Monday editions U.S. President Bush would likely announce the decision this week.

The officials said they had to allow for the possibility that Bush would make some change in the plan, but a source close to the White House said it was "all but set in stone," the Post reported.

A spokesman for the White House denied a decision had been made to repeal the tariffs.

"The matter is still under review and we'll make announcements when there are announcements to make," the spokesman told Reuters.

Ending the tariffs 16 months ahead of schedule could spark a political backlash against Bush in next year's presidential election in the pivotal steel-producing states of Ohio, Pennsylvania and West Virginia.

The Washington Post sources said Bush's aides concluded they could not run the risk that the European Union would carry out its threat to impose sanctions on citrus fruit from Florida, farm machinery, textiles and other products.

A source involved in the negotiations said White House aides looked for some step short of a full repeal that would satisfy the European Union but concluded that it was "technically possible but practically impossible," according to the Post.

Speculation had mounted that Washington would scrap or roll back the controversial tariffs after it last week sought and obtained an effective delay in retaliatory sanctions by countries opposed to them.

The European Union, one of a number of trade partners to take action at the WTO over the levies, had warned it was ready to hit Washington with sanctions on up to $2.2 billion of goods within five days of the WTO approving the court ruling.

The Bush administration imposed the duties, initially for up to 30 percent, in 2002 to help defend the country's struggling steel industry against cheap imports.

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