The purpose of tariffs (in a normal world) is to make it harder for domestic entities to buy international goods. Typically, this will spur growth of a particular sector of industry within a country over time.

The way Trump is using them as a battering ram in an attempt to punish other countries, rather than incentivize steady growth, is why the US market is tanking and likely headed to another recession (or worse).

By retaliating in kind, the EU will be incentivizing their citizens and companies not to buy from the US. This will hurt companies that are based in the US, like Google, Microsoft, Meta, etc., further sending the US economy into freefall and bolstering the European economy, since they aren't trying to punish every single trade partner in existence.

There may be other ways they try to move money around to avoid the tariffs, but governments are aware of how big businesses operate and often try to close those kinds of loopholes. Since this has become a global political issue, I would imagine they'll be keeping a more watchful eye than normal on things.