The high-profile probe into the social media platform was seen as a test of the EU's resolve to police Big Tech. Even before the penalty was made public, US Vice President JD Vance warned against "attacking" US firms through "censorship".
Hours after Brussels announced the fine, US Secretary of State Marco Rubio joined the attack.
"The European Commission's $140 million fine isn't just an attack on X, it's an attack on all American tech platforms and the American people by foreign governments," Rubio posted on X.
"The days of censoring Americans online are over."
This was the first fine imposed by the European Commission under its Digital Services Act (DSA) on content.
X was guilty of breaching the DSA's transparency obligation, said a Commission statement.
The breaches include the deceptive design of its "blue checkmark" for supposedly verified accounts, and its failure to provide access to public data for researchers, it added.
"This decision is about the transparency of X" and "nothing to do with censorship," the bloc's technology commissioner Henna Virkkunen told reporters -- pushing back against Washington's line of attack.
Posting on X on Thursday, Vance had told the EU it "should be supporting free speech not attacking American companies over garbage" -- to which Musk replied "Much appreciated".
- 'Deception' -
Musk's platform -- targeted by the EU's first formal DSA investigation in December 2023 -- was found to have breached its rules on several counts in July 2024.
The EU found that changes made to the platform's checkmark system after Musk took over in 2022 meant that "anyone can pay" to obtain a badge of authenticity -- without X "meaningfully verifying who is behind the account".
"This deception exposes users to scams, including impersonation frauds, as well as other forms of manipulation by malicious actors," said the Commission statement.
X had also failed to be sufficiently transparent about its advertising and to give researchers access to public data in line with DSA rules, it added.
X remains under investigation over tackling the spread of illegal content and information manipulation.
The first part of the X probe had appeared to stall since last year -- with no movement on imposing a fine.
Weighing on the EU's mind was the picture in the United States -- starkly different from 2023 -- after Trump returned as president this year with Musk by his side.
While the pair later fell out, the tycoon has since reappeared in White House circles, and Brussels has had to contend with the prospect that any fine on X would fan tensions with Trump.
- 'Words to action' -
The DSA gives the EU power to fine companies as much as six percent of their global annual revenue -- and in the case of X the bloc could have based itself on Musk's entire business empire, including Tesla.
Brussels settled on what is arguably a moderate sum relative to X's clout -- but Virkkunen told reporters it was "proportionate" to the violations at stake.
"We are not here to impose the highest fines," said the tech chief.
"We are here to make sure that our digital legislation is enforced," she added. "If you comply with our rules, you don't get a fine -- and it's as simple as that."
She also emphasised that this was one part of a "very broad investigation" into X, which was ongoing.
The Center for Countering Digital Hate advocacy group said the EU move "sends a message that no tech platform is above the laws all corporations have to abide by".
Washington has made plain its distaste for EU tech laws. A new national security strategy released Friday by Trump's administration urges Europe to "abandon its failed focus on regulatory suffocation".
France's digital affairs minister Anne Le Henanff hailed the EU's "historic" decision. "By sanctioning X, Europe shows it is capable of moving from words to action," she said.
Germany's digital minister Karsten Wildberger said the bloc's digital rules "apply to everyone, no matter where they come from".
At the same time as the X fine, the Commission announced it had accepted commitments from TikTok to address concerns over its advertising system.
But the Chinese-owned platform remains under DSA investigation over other issues.
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