Washington ? Facing the threat of a trade war, President Bush on Thursday lifted 20-month-old tariffs on foreign steel, a move that will hurt steelmakers in states critical in next year’s election.

To soften the blow, the administration announced a beefed-up monitoring program to guard against a sudden flood of foreign steel coming into the country.

Within minutes of the announcement, the 15-nation European Union announced in Brussels that it was lifting its threat of sanctions on $2.2 billion of U.S. products.

“These sanctions … were there as a tool for compliance,” EU Trade Commissioner Pascal Lamy said. “They’ve complied and the sanctions will disappear.”

Bush said the tariffs had been imposed to give the domestic industry critical time to modernize and to protect jobs.

“These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances, it is time to lift them,” Bush said in a statement.

The tariffs, covering a range of steel products, were originally scheduled to remain in effect for three years, until 2005, to give U.S. steelmakers protection from foreign competition.

Martin Kurtz, left, and John Mitchell, workers from the Edgar Thompson Plant of United States Steel Corp.'s Mon Valley Works, walk from the mill after their shift. Both of the men said Thursday they thought the tariffs on imported steel helped the domestic industry, but neither said that President Bush's decision to drop the tariffs would sway their vote.

The president acted after the European Union and other trading partners threatened to impose billions of dollars in sanctions on a wide range of U.S. products made in states considered to be critical in next year’s presidential race.

While those states — ranging from Florida to California — will escape foreign retaliation on their products, other key states, including West Virginia, Ohio and Pennsylvania, are home to domestic steel makers who will face greater foreign competition.

Bush said the tariffs had enabled U.S. steel companies to compete both at home and globally. He said the administration would continue to monitor foreign steel imports to make sure that U.S. companies are not again faced with unfair foreign competition.

He said that U.S. negotiators would continue to push America’s trading partners to put in place “new and strong disciplines on subsidies” that foreign governments provide to their domestic steel producers.

“I strongly believe that America’s workers can compete with anyone in the world as long as we have a fair and level playing field,” Bush said in the statement read by White House spokesman Scott McClellan.

U.S. Trade Representative Robert Zoellick said that the situation facing the U.S. steel industry had improved greatly since Bush imposed the tariffs. Sales of domestic steel and company profits are up dramatically.

“Not only is the industry much stronger today than it was 20 months ago, but the economic circumstances … have changed,” Zoellick said.