Washington's envoy to Brussels has warned that the United States would retaliate if the European Union continues with plans to limit US companies' involvement in pan-continental military projects, the Financial Times reported.

The US Ambassador to the EU Gordon Sondland said that Washington would consider various responses if EU member states keep businesses from other countries away on the multibillion-euro projects. He said it would unlikely to "be positive for either side".

Sondland also said he was confident the EU would alter its plan to consider third country participation only on a case-by-case basis because "common sense dictates they should change it".

"If for some reason it's just a stubbornness or protectionism that doesn't allow it to be changed, I think the United States has a lot of responses . . . which I don't think would be positive for either side," he said.

The EU announced a series of joint military projects reportedly including a spy school and a new generation of battle land missiles in November, and the FT noted that "the ambitions of the moves suggest that the prospect of a European army remains distant".

Called by the leaders of France and Germany, the ventures, under the 25-country Pesco Initiative, show how the EU urgently wants to improve its capabilities without cutting across NATO's responsibility for Europe's collective defense, the FT noted.

Sondland said that the transatlantic relationship remained fundamentally "very strong", but he was sharply critical of EU states over security.

He warned that the EU's proposals of rules to fund bloc defense projects such as the development of new infantry fighting vehicles and missile systems threatened to restrain US companies.

The European Commission has suggested it will bolster the European Defence Fund with a 13 billion euros ($14.6 billion) investment.

"Even if they wanted to consider an R&D project from the United States, the way they're proposing to write this is they can't," he said.

"Their hands are going to be tied. That makes no sense to us at all and we're engaged in some very, very in-depth discussions about why you would want to preclude at least your ability to consider . . . a US proposal," he said.

The US ambassador was also unhappy with how EU countries' were dealing with China. The head of Germany's National Cyber Security Agency last month backed a "no-spy" deal to manage concerns about using Huawei equipment in new 5G mobile communications networks. Sondland warned that using Chinese 5G mobile technology risked making European countries vulnerable "for the next 10 to 20 years".

Sondland, however, denied relations between the US and EU were "irreparably damaged". "Husbands and wives have spats about money. It doesn't mean they're going to get a divorce," he said.