The World Trade Organisation has ruled that the US can impose tariffs worth €6.85bn on EU goods.
The ruling follows a 15 year trade dispute over subsidies given to France-based aerospace firm Airbus.
It paves the way for US President Donald Trump to open a new trade war front as the global economy struggles under the effects of his dispute with China.
Speaking at the White House following the ruling, President Trump said it was a "big win" for the US and reiterated his claim that countries have been "ripping off the United States for many years."
The WTO ruled that the Airbus had been given aid by EU countries to develop its A380 superjumbo jet.
The body will rule early next year on what tariffs the EU can impose in retaliation for state aid the US provided to American company Boeing.
The European Commission said it would retaliate if the US imposed any targeted sanction – and warned that a move to do so would be “short-sighted and counterproductive.”
French finance minister Bruno Le Maire said: "We will be 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 United States next year.
He warned that a trade war risked causing damage on both sides of the Atlantic at a time when the US-China trade war is already damaging demand in the global economy.
The provisional list of targets the US Trade Representative has identified for tariffs of up to 100% includes Airbus jets, helicopters, wine, handbags and cheese.
Airbus has warned against a "lose-lose" trade war – noting that it employs 4,000 staff in its US operations with tens of thousands more in the supply chain dependent on its work.
EU manufacturers are already facing US tariffs on steel and aluminium.
President Trump has also threatened to penalise EU cars and car parts.