By Tom Miles and Tim Hepher
GENEVA/PARIS (Reuters) - The World Trade Organization ruled on Tuesday the European Union had ignored requests to halt all subsidies to planemaker Airbus, prompting the United States to threaten sanctions against European products unless the EU stops "harming U.S. interests".
The WTO said the EU had failed to remove support in the form of preferential government loans for the world's largest airliner, the A380, and Europe's newest long-haul plane, the A350, causing losses for Boeing and U.S. aerospace workers.
However, the Geneva watchdog dismissed U.S. claims that loans for Airbus's most popular models, the A320 and A330, were costing Boeing significant sales and in so doing narrowed the scope of one of the world's longest and costliest trade spats.
Airbus shares fell shortly after the WTO issued its findings and were poised to close down around 0.86 percent.
The report comes at a time of mounting trade tensions over U.S. aluminium and steel tariffs and the impact on European firms of Washington's decision to exit the Iran nuclear pact.
U.S. Trade Representative Robert Lighthizer said in a statement the United States would slap countermeasures on European goods unless the EU fell into line.
Boeing predicted such tariffs could reach billions of dollars a year starting as early as 2019.
"This is expected to be the largest-ever WTO authorisation of retaliatory tariffs," it said in a statement.
The EU's Executive Commission said most of the aid faulted in earlier rounds of the long-running case had expired in 2011 and that it would swiftly comply on the remaining measures.
Tuesday's finding wraps up a case against the EU dating back to 2004 and means the U.S. can now seek WTO backing to impose sanctions on an as yet unspecified list of European goods.
At the same time, the WTO is close to finalising a similarly drawn-out case against subsidies for Boeing, and Airbus says this could in turn spark EU sanctions against the United States.
"Today's report is really only half the story," said Airbus Chief Executive Tom Enders.
Barring a negotiated deal, both sides are expected to push for billions of dollars in sanctions annually, but the amounts will depend on arbitration, expected to take around a year.
(Additional reporting by Ankit Ajmera, Writing by Tim Hepher, editing by Tom Miles and Sarah White)
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