By Stephen Evans
BBC North America business correspondent
The European Union is set to impose tariffs on US companies that will cost American business hundreds of millions of dollars.
Mr Lamy says the tariffs will be imposed on Monday
The EU trade commissioner said a 5% duty would be put on exports from the US to Europe from Monday because of unfair help to firms by Washington.
Pascal Lamy said rates would continue to rise unless the US changed its law.
But with jobs an issue in the US, there will be grassroots political pressure not to back down.
The trade dispute between America and Europe has been a war of words so far with tariffs threatened but not imposed.
That will now change.
The World Trade Organisation, which polices world trade, has ruled that a tax break given to American exporters, like Boeing and Microsoft gives them an illegal unfair advantage.
Trade commissioner Mr Lamy told American legislators on a visit to Washington that the tariffs will be imposed on Monday.
"We have been extremely patient, but there is no way we can avoid these sanctions which will hopefully concentrate minds on the urgency of passing legislation," Mr Lamy said
An extra five 5% tax will be put on some US exports with the rate rising the longer Congress and the Senate refuse to change the law.
If no changes are made, the duty will reach 17% by March 2005.
The EU decision gives American lawmakers a dilemma.
With jobs an issue for US elected officials, there will be grassroots pressure not to back down to an international body like the WTO or to what they will see as European politicians.