World Trade Organisation's (WTO's) appellate body, turned down US appeal, clearing the way for the EU to levy new duties on US exports reaching into billions of euros.
The US was given three months to avoid retaliatory sanctions of extra duties to US exports, after Brussels won trade dispute.
WTO has said the EU may impose sanctions of up to $4 billion on US goods.
Export tax-break schemes have been struck off by Congress, and the dispute should not harm relations, said Neena Moorjani, spokeswoman for the office of US trade representative.
Appellate body report will be adopted by the WTO within 30 days and the US will have 60 days to incorporate WTO obligations, the EU noted.
The EU will rule out system of tax benefits that US exporters get, including those accorded to Boeing Corporation, against their European competitors, said EU trade commissioner Peter Mandelson.
The US and Brussels are at a stalemate over illegal subsidies to Boeing and Airbus.
The US wants EU to make a beneficial offer on agriculture to break the deadlock in the WTO's Doha round of talks to free up global trade.
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