As America’s capricious trade war rolls on, the European Union may be Washington’s next target. The EU’s instinct to retaliate is understandable — but a tit-for-tat escalation is exactly the wrong response.

Although details are murky, the White House plans to announce what it calls “reciprocal” tariffs on April 2 — with rates that factor in everything from value-added tax to subsidies to regulation. It should go without saying that this idea would harm everyone involved. About one-third of EU goods exports to the U.S. could suddenly face tariff rates of 20%, almost certainly throwing Europe into recession. The EU has prepared duties on as much as $28 billion in U.S. products in return; Americans would see prices soar on (among other things) prescription drugs, manufacturing machinery and inputs for a slew of industries.

One hopes that sanity will still prevail. If not, Europe’s response to this reckless provocation will determine just how damaging it will be.

European officials are justifiably outraged. Yet moral arguments are lost on the current U.S. administration. Moreover, trade wars are costliest for the side with the surplus. Europe can, as it did during Donald Trump’s first term, absorb the cost of targeting a list of symbolically important items — such as Harley-Davidson motorcycles — but broader retaliation would amount to self-harm. In particular, the bloc should avoid countermeasures against U.S. financial, tech or other services companies, all of which benefit European companies and consumers.

Europe also has carrots to offer, many in its own interests. Encouraging companies to boost imports of U.S. liquefied natural gas would meet a key White House demand while also cementing independence from Russian energy. Likewise, more U.S. weapons purchases are inevitable as the EU plugs holes in its military preparedness and builds up its defense industry.

Europe should also fix its own trade distortions. Slashing its 10% tariff on cars to match the U.S.’s 2.5% (and extending it globally per World Trade Organization rules) is overdue, even if it stings for European carmakers. A clearer, less antagonistic approach to tech regulation might ease relations with the U.S. while also boosting growth and aiding homegrown innovation.

Beyond damage limitation, Europe needs to muscle up, both militarily and economically, for the longer term. Germany’s decision to bypass debt limits to increase defense spending is welcome. A similar proposal from European Commission President Ursula von der Leyen, intended to mobilize some €800 billion ($867 billion) for an EU-wide military buildup, also holds promise.

Finally, Europe needs to strengthen its economic resilience. A proper financial-markets union — something the EU has long promised and is considering anew — would better allocate capital and spur innovation. Streamlining energy markets, harmonizing services regulation and fast-tracking digital integration would further harden the bloc against shocks. These aren’t new ideas, but pressure from the U.S. should add a sense of urgency.

A tariff war would harm both sides — bringing higher prices, broken supply chains and weaker alliances — without fixing any of the problems the U.S. administration is preoccupied with. But Europe isn’t helpless. It can wield its size as the world’s second-largest economy, shore up its defenses and reform smarter. In doing so, it might ensure that at least some good comes from this otherwise pointless undertaking.

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