The WTO has found that both Europe's Airbus and its United States rival Boeing received billions of dollars of illegal subsidies in the world's largest corporate trade dispute, a legal marathon dating back to 2004.
The focus of nervous global financial markets will then shift to Washington where the US Trade Representative is expected to move quickly to narrow down a preliminary list of goods in line for tariffs, a US source said.
The decision by the World Trade Organization (WTO) on Wednesday pushes a 15-year corporate dispute over illegal support for transatlantic plane giants to the centre of caustic world trade relations - and it comes on top of a tariff war between Washington and Beijing.
"Airbus will continue working with its USA partners, customers and suppliers, to address all potential consequences of such tariffs that would be a barrier against free trade and would have a negative impact on not only the United States airlines but also U.S. jobs, suppliers, and air travelers", Airbus CEO Guillaume Faury said in a press release.
"My sense is that there will be a settlement only after both sides have imposed tariffs on each other", he said.
The new tariffs can take effect after the WTO adopts the report, which is expected to happen at a meeting in Geneva this month. The President already issued a 25% duty on steel from the bloc in March 2018, and is threatening billions of dollars worth of tariffs on European cars.
The WTO ruling now means that goods such as cheese, linen and swordfish will become more expensive to export to the United States, as well as aircraft part prices going up. Such a decision would allow Washington to target European Union goods worth the same amount.
German Chancellor Angela Merkel acknowledged "we have lost a matter under WTO law".
Given Trump's enthusiasm for tariffs, Hunter said, it's unclear what the president and his trade negotiator, Robert Lighthizer, really want: "Does he want to set up a negotiation to get a resolution or is it just tariffs for tariffs' sake?" The ruling centered on Airbus' 350XWB _ a rival of Boeing's 787 _ and the double-decker A380, which tops the Boeing 747 as the world's largest commercial passenger plane.
Sectors most sensitive to global trade and exports from luxury goods to mining companies bore the brunt of the sell-off, with Gucci-owner Kering and Hermes down more than 2%.
The company also urged the Trump administration to take into account the forthcoming WTO decision on Boeing, saying those reciprocal tariffs could exceed the value of the USA sanctions.
Under the Obama administration, the USA requested authorization in 2011 to "take countermeasures" to undo the adverse effects of the European Union subsidies. Trump has insisted the move is needed to protect US national security interests, but the Europeans claim it is simply protectionism and breaks global trade rules. Trump has also threatened to slap duties on European automakers.