The European Central Bank is sounding the alarm about the scenario of a catastrophic trade war should Europe retaliate against Donald Trump’s tariffs.

A full-blown trade war would cause global GDP to shrink, ECB chief Christine Lagarde warned in an interview with the Financial Times.

“In a trade war, you can soon see an escalation, which in my view is purely negative… This cannot be in anyone’s interest, not the US or Europe, no one… This will was causing a global reduction in GDP,” the French official explained.

In fact, he called on EU member states to buy more US goods, such as defense equipment and LNG. “We could buy some things from the US, and signal that we are ready to sit down at the table and see how we can work together,” he said.

“I think that’s a better scenario than a retaliatory strategy, which can lead to unintended consequences where nobody really wins,” he said of US President-elect Donald Trump’s tariffs on China. Mexico and Canada to be the first countries on his list.

He pointed out that Trump has proposed a wide range of possible options for tariffs, hinting that he may be “open to discussion” as there is an opportunity for EU leaders and the new US president to move forward with new negotiations.

Christine Lagarde clarified that it is too early to assess the exact economic impact of the tariffs announced by the newly elected US president, while she estimates that “if anything, there may be a short-term resurgence of inflationary pressures”.