Washington warned London on Wednesday that its exit from the European Union means Britain cannot impose tariffs on the US in a dispute over aviation industry subsidies.
London, which is hoping for a post-Brexit trade deal with Washington, had announced earlier in the day it would drop EU tariffs on US goods adopted as part of the spat, even as it reserved the right to impose duties.
The US Trade Representative (USTR) said the UK never had the authority in the first place under World Trade Organization (WTO) rules to levy tariffs in the long-running dispute over subsidies for aircraft manufacturer Boeing and Airbus.
"Only the EU sued the United States at the WTO; the UK did not bring a case in its individual capacity," USTR said.
"Therefore, the UK has no authority from the WTO to participate in any such action after it no longer is part of the EU."
London however disputed the US interpretation of its ability to impose tariffs.
Earlier Wednesday, Prime Minister Boris Johnson's official spokesman said Britain's Department for International Trade had "confirmed that we would be able to legally impose these tariffs outside of the EU".
Johnson's government is keen nevertheless to defuse the row as it seeks a post-Brexit trade deal with the incoming administration of President-elect Joe Biden.
"We are serious about de-escalation and as a gesture of our determination to unlock a deal, we will be suspending retaliatory tariffs resulting from the Boeing dispute from January," the spokesman said.
"This demonstrates the seriousness we place about reaching a negotiated settlement. But we obviously reserve the right to reimpose tariffs if a settlement isn't reached."
- Best interests -
US President Donald Trump last year imposed 25 percent tariffs on wine, cheese, olives and other European delicacies in a battle over subsidies to planemaker Airbus.
The EU responded recently with its own round of tariffs on imports of some farm produce, including wheat and tobacco plus strong alcohol and chocolate, after the World Trade Organization faulted Washington over state aid for Boeing.
Johnson's government decided to suspend the measures from January 1 of next year, when Britain leaves the European customs union and single market, in order to encourage the US to agree to a negotiated outcome -- which USTR said it also wanted.
"Like the UK, the United States considers that a negotiated settlement best serves the interests of all parties," its statement said.
International Trade Secretary Liz Truss also noted that Britain would be keeping keeping retaliatory tariffs imposed after the United States put "illegal and unfair tariffs" on British steel.
EU officials have also said they would prefer a negotiated settlement but have followed through on implementing the tariffs, despite hopes for better ties under Biden, who will take over following Trump's reelection loss.