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President Trump’s tariffs are an economic policy mistake of historical proportions, causing more harm to the United States than to almost all of its trading partners. Even with of big tariff hikes (except for China), the US tariff on the European Union remains at a very high 10%, and higher for cars, steel and aluminium.

The EU has already  on the US steel and aluminium tariffs and continues to weigh its options. Trump's 9 April announcement has bought it time and space for tactical manoeuvring. Even before the announcement, the wisdom of retaliation . It would increase the costs of the trade war for Europe, but ruling it out would be a serious mistake. Retaliation costs are a short-term price Europe should be willing to pay to advance its strategic objectives, with five main arguments in favour of retaliation:

Creating the conditions for the injury to be lifted. The bravado with which Trump announced  on 2 April makes their complete elimination hard to imagine, despite the subsequent partial climbdown. However – as Trump may have realised – the political costs of tanking the stock markets will be significant, increasing inflation and putting the US economy at risk of recession. Trump seems to believe that some short-term pain is worth bringing the US into his imagined new golden age, but eventually there will be change. Not only could the next president quickly rescind Trump’s executive orders, but Section 8 of the US Constitution also gives US Congress power over tariffs. The more political pressure the EU can add, the sooner tariffs might be ended.

Deterring further escalation. Some worry about the trade war ending up in an escalatory spiral. However, the idea that retaliation would invite further tariffs while not retaliating would not seems naïve. For Trump, tariffs are the policy instrument of choice in foreign policy. His chief economic advisor also frames them . Tariffs on key products such as pharmaceuticals are yet to be announced. If the costs associated with tariffs are not sufficiently high, they will be used again and again. 

Showing resilience. Trump is not the only predator out there. Russia’s invasion of Ukraine was predicated on Putin’s calculation that the West’s willingness to endure economic hardship was so low that it wouldn’t support Ukraine. Trump follows the same logic: he seems quite willing to put the US economy at risk if he thinks he can intimidate others into not responding. Not retaliating because of the associated costs gives adversaries escalatory power. If they can count on European leaders not acting for fear of self-inflicted economic hardship, it becomes much easier for them to press their advantage. For Europe, showing weakness invites further predation – not just from Trump.

Showing leadership. Punishing the hegemon for tearing up the global trading system is a collective-action problem. Trump might believe he can wage a trade war against the entire world, and it is true that every economy except for the EU and China is weak in direct comparison. However, the US only has the upper hand if other countries leave themselves open to individual coercion. Europe is in a unique position, as the only one of the big three economies still upholding the rules-based trading order. China bends the system to its advantage while the US has de facto withdrawn from the World Trade Organisation. But the other two thirds of the world economy still rely on the WTO and even China sees retaining the system as in its interest. Europe should set an example for others to follow and organise a coalition of the willing in support of rules-based trade. 

Negotiation position. The US might not be serious about negotiations right now, but in any negation on a new settlement, the EU’s goal should be to return to the previous status quo. If the US negotiation position starts with the paused 20% tariffs on the EU (or the reduced 10%), and the EU rules out a tough response, it will have nothing to offer in return for the lifting of the tariffs. Under such circumstances, Europe could end up in a worse situation in the long run.

While necessary, retaliation is not a goal in itself. Europe did not choose and has no interest in this trade war. It should exercise caution and respond proportionately and moderately, with measured retaliation. Despite everything, the US remains the EU’s most important economic relationship. The objective of any response should be to keep trade across the Atlantic as open as possible.