The EU has been given permission to levy tariffs on US products worth $4bn in retaliation for subsidies given to Boeing, in the latest salvo in a bitter 16-year battle between the US planemaker and its European arch rival, Airbus.

The ruling by the World Trade Organization (WTO), delayed by the coronavirus pandemic, could increase trade tensions shortly before the US presidential election on 3 November, although it could also set the stage for tariff negotiations between the EU and the US, which has already imposed levies on European goods in parallel action against Airbus.

Valdis Dombrovskis, the European commission vice-president in charge of trade, said: “Our strong preference is for a negotiated settlement. Otherwise, we will be forced to defend our interests and respond in a proportionate way.”

The WTO had ruled in April 2019 that the US subsidies to Boeing were illegal, but had not said how big the gains were. However, between 2006 and 2040 Boeing was expected to benefit from $6bn in tax breaks, the WTO said.

Airbus and Boeing have been locked in the tit-for-tat trade dispute since 2004, when the US aerospace champion accused its European rival of receiving illegal launch aid from multiple governments for the development of the A350 twin-aisle plane and its larger cousin, the A380 superjumbo.

Boeing, meanwhile, received tax breaks from the state of Washington. The WTO has ruled that the subsidies to both Airbus and Boeing were illegal, but the drawn-out dispute has outlasted several chief executives for both companies, and one of the planes in question, the A380, has since ceased production.

In October 2019, the US imposed tariffs worth $7.5bn on EU products including scotch whisky and French wine and cheese in retaliation for the EU subsidies to Airbus. The Scotch Whisky Association this month said that the 25% tariff on its exports had contributed to a 32% decline in exports to the US over the year, costing the industry £360m.