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 could mean tariffs on EU goods ranging from aircraft parts to luxury goods and shellfish.
Brussels said the move would be short-sighted and counterproductive.
The US had wanted to impose tariffs on $11bn worth of EU imports in retaliation for illegal aid to Airbus but the figure was reduced by the WTO.
Meanwhile, the two sides are waiting for the WTO to decide the permissible retaliation against the US in the European Commission’s parallel case against Boeing. That ruling is expected next year.
The European Commission 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.
Airbus chief executive Guillaume Faury also called for a resolution.
He said it would be a “a barrier against free trade and would have a negative impact on not only the US airlines but also US jobs, suppliers, and air travellers”.
Airbus said that close to 40% of its aircraft-related procurement comes from US aerospace suppliers, which it said it supports 275,000 American jobs in 40 states.
Analysis by BBC economics correspondent, Andrew Walker
Tensions in global trade have already risen since President Trump took office.
There have been US tariffs on steel and aluminium imports and the action against China. The latter case is one where many trade partners share the underlying concern about some of China’s polices but are anxious about the response the US has chosen.
The European Union was quick to warn the US that if it does go ahead with the tariffs, the EU will respond in kind – the European case against Boeing is expected to reach the equivalent stage next year.
If all that happens, the EU said, it can only inflict damage on citizens and business on both sides of the Atlantic. It’s worth remembering that the International Monetary Fund and others see trade conflict as one of the biggest risks to the global economic outlook.
The ruling led to reaction from governments across the EU including the UK which said: “Resorting to tariffs is not in the interests of the UK, EU or US.
“We are working closely with the US, EU and European partners to support a negotiated settlement to the Airbus and Boeing disputes,” it said.
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”.
The WTO’s dispute settlement body must formally adopt the ruling but is not expected to overturn the decision.
These tariffs are separate to US President Donald Trump’s on-going trade disputes with countries around the world.
They were sparked in March 2018 when his administration announced tariffs of 25% on steel and 10% on aluminium imported into the US.
It prompted the EU to impose €2.8bn (£2.4bn) of duties on US goods such as bourbon whiskey, motorcycles and orange juice last June.