The George W. Bush administration is expected to rule Friday that duties can be applied to products that benefit from state subsidies of foreign countries, the newspaper cited an unnamed official as saying.

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Industries as varied as steel and consumer goods could initiate action for punitive duties to be levied on products supported by government grants, bailouts and low-interest loans, the paper said.

The initial test case for the change in policy was brought before the US Commerce Department by paper company Newpage.

Gilbert Kaplan, a lawyer for Newpage, said the new approach to tariffs "is a very important precedent for US manufacturers and workers."

China accounted for 28 percent of the US record 763.6 billion-dollar deficit in 2006 and Lavin warned that concerns in Washington about the imbalance were growing stronger.

Tim Stratford, the assistant United States trade representative for the Asia region, confirmed to the newspaper Washington's increasingly combative mood.

He told the Financial Times that the administration was prepared to launch more government-led trade cases against China.