The World Trade Organization (WTO) has ruled that the U.S. can impose penalty tariffs worth $7.5 billion on imports of EU goods to compensate for harm to Boeing – a move that could open up a new front in the Trump administration's trade wars.

A WTO arbitrator said on Wednesday that the U.S. was entitled to impose retaliatory duties on EU products because of illegal subsidies the EU had provided to European airplane manufacturer Airbus.

The decision marks the biggest arbitration award ever issued by the WTO and stems from a 15-year battle over government support programmes for aircraft makers Airbus and Boeing Co, which the two sides claim have harmed their domestic airplane makers. 

But in what could amount to a tit-for-tat, the trade regulator is expected to rule next year on a separate case brought by the EU over U.S. subsidies to Boeing, which also have been deemed illegal. The WTO will determine in that case the value of U.S. exports the EU will be permitted to hit with tariffs.

The Wednesday ruling sets the stage for a possible trade war between the EU and the U.S. The EU has offered to negotiate a settlement, but Cecilia Malmström, the EU's trade chief, said the U.S. has not responded.

"The EU has, as recently as this July, shared concrete proposals with the U.S. for a new regime on aircraft subsidies, and a way forward on existing compliance obligations on both sides. So far, the U.S. has not reacted," she said.

She also appealed to the U.S. not to impose penalties, saying they would be "shortsighted and counterproductive".

The mutual imposition of countermeasures, Malmström said, "would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time".

Under WTO rules, a country that wins a ruling that financial support violates the global trade body's rules can impose penalties on imports of goods from the losing country. The WTO decides the value of the penalties so that they compensate for the economic harm caused by the illegal subsidies.

Malmström warned that the EU would have little choice but to retaliate if the U.S. went ahead and imposed penalties on EU exports to the U.S.

"Our readiness to find a fair settlement remains unchanged. But if the U.S. decides to impose WTO-authorised countermeasures, it will be pushing the EU into a situation where we will have no other option than to do the same."