The European Union says it has started imposing trade sanctions against the United States in retaliation for tax breaks given to U.S. exporters.

Officials in Brussels say a five percent European Union penalty tariff awaits such American exports as jewelry, refrigerators, toys and paper products. The penalty will climb by one percentage point each month that the United States fails to bring its laws in line with international trade rulings.

The tariffs could cost American exporters up to $300 million this year. The World Trade Organization, which supports the sanctions, has ruled against the United States in its long-running dispute with Europe over the so-called Foreign Sales Corporation law.

The WTO says the law runs counter to global trade rules by providing tax breaks to thousands of American companies doing business overseas. The tax break is estimated to be worth $5 billion a year to American exporters, including such giants as Microsoft and Boeing.

The U.S. Congress is expected soon to begin debate on legislation that would repeal the provision, but it remains unclear when lawmakers might adopt such a measure.

Some information for this report provided by AP and AFP.