The US has been given the go-ahead to impose tariffs on $7.5bn (£6.1bn) of goods it imports from the EU.
It is the latest chapter in a 15-year battle between the US and the EU over illegal subsidies for planemakers Airbus and rival Boeing.
The ruling by the World Trade Organization (WTO) could mean tariffs on EU goods ranging from aircraft parts to cheese and salmon fillets.
Brussels has threatened to retaliate similarly against US products.
How did this row start?
The US first filed the case against Airbus in 2004, arguing that cheap European loans for Airbus amounted to illegal state subsidies.
The WTO decided in favour of the US, which subsequently complained that the EU and certain member countries were not in compliance with the decision, prompting years of further wrangling.
While the US had wanted to impose tariffs on $11bn worth of EU imports in retaliation for the aid to Airbus, the WTO cut that figure to $7.5bn - still the largest penalty of its kind in WTO history.
The WTO's dispute settlement body must formally adopt the ruling but is not expected to overturn the decision.
What happens next?
The US, which has previously said it would move forward with tariffs, must decide which items it will hit with higher import duties. In April, it published a list of $11bn worth of potential targets.
Meanwhile, the two sides are waiting for the WTO to decide on what tariffs the EU can impose against the US in retaliation for US state aid given to Boeing. That ruling is expected next year.
The European Commission, which has proposed tariffs on $20bn (£15bn) of US goods, said the two sides should try to reach a settlement.
"But if the US decides to impose WTO authorised countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same," the European Commission said.
Could there be a settlement?
Governments across the EU, including the UK, echoed the call for the dispute to be resolved without tariffs.
"Resorting to tariffs is not in the interests of the UK, EU or US," the UK said. "We are working closely with the US, EU and European partners to support a negotiated settlement to the Airbus and Boeing disputes".
Bruno Le Maire, France's finance minister, said the country was "ready to respond firmly with our European partners".
"A friendly resolution to the Boeing/Airbus dispute is the best solution, and all the more so given that Europe could impose sanctions on the US next year," he said.
Germany's Chancellor Angela Merkel said: "A decision has been made based on international law through which Airbus will be affected unfortunately and we will see how the Americans will react".