The EU has failed to comply with rulings that it should cut subsidies to aircraft maker Airbus, the World Trade Organisation has ruled.
Rival Boeing says it could pave the way for the US to seek up to $10 billion in annual retaliatory tariffs.
It follows 12 years of accusations between the two giant aircraft manufacturers that each received state funding.
The WTO is yet to rule on a similar EU complaint that Boeing benefits from billions of dollars in tax breaks.
Washington responded to the ruling by calling for an immediate halt for EU subsidies to support US jobs.
Airbus said it would appeal the judgment and the EU said it found some of the findings "unsatisfactory".
The ruling comes ahead of next week’s International Civil Aviation Organisation assembly in Montreal which will try to agree the details of a global market-based measure to address international aviation emissions.
Bill Hemmings, director of aviation at sustainable transport group Transport & Environment, described the ruling as a “wake-up call to anyone who believes that the ICAO assembly will solve aviation’s climate problem”.
He added: “Flying is the cheapest and quickest way to fry the planet because not only manufacturers, but also airlines and airports, are subsidised to the hilt.”
But subsidies above fall outside of WTO rules and will only be removed with action by governments.
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