German Chancellor Angela Merkel on Wednesday warned US President Donald Trump against unleashing an all-out trade war after he threatened to impose steep tariffs on cars from the European Union.

With tariffs on the auto industry expected to be particularly hard for Germany to take because of its sizable industry, Merkel told the German Parliament she was monitoring the situation.

“We now have tariffs on aluminum and steel and we have a discussion that is far more serious,” she said. “This is taking on the contours of a trade conflict – I don’t want to use words that go any further. It’s worth every effort to try and defuse this so that this conflict does not become a war.”

She said it was preferable to avoid escalation “but of course there are two sides to that”.

Merkel noted that the head of the EU’s executive commission, Jean-Claude Juncker, will soon travel to the US and added that the good functioning of the world economy depends on countries working together as partners.

Merkel also questioned why surpluses and deficits are measured in trade of goods. If digital services were included, she said, it’s likely that the US would have a trade surplus with Europe.

“It is almost old-fashioned only to count goods and not to count services,” she said.