The move, aimed at getting Washington to change a disputed system of export tax breaks, could cost US companies $315 million this year and $666m in 2005 if sanctions remain in place.
It has the backing of the World Trade Organisation, who said the EU could respond to the tax breaks with the imposition of up to $4 billion worth of sanctions on US goods. .
However, according to European Trade Commissioner Pascal Lamy, the sanctions are not about retaliation but compliance.
“Despite waiting for more than two years, the US has not brought its legislation in line with WTO rule,” he said. .
“We are therefore left with no choice but to impose countermeasures.” .
The sanctions will be phased in gradually, starting at $16m as an extra five per cent duty on selected US goods in March, and rising one percentage point each month thereafter.