Members of the Roman church like to be called "Catholics." Some Protestants balk at that designation and call them "Romanists" or "papists." Catholics often consider that offensive.
Strikingly, this parallels the transgender debate. If a man self-identifies as a woman, should we use feminine pronouns when addressing or referring to that person? Likewise, if a woman self-identifies as a man.
On a related note is the use of euphemisms like "pro choice," "a woman's choice," or "reproductive freedom" for abortion.
I don't think there's a uniform obligation to use designations which correspond to how people or groups self-identify. It really depends on whether we agree with their self-identification. If their usage is at variance with reality or propagandistic, it generally makes sense to resist their usage.
However, traditional designations can be like dead metaphors. No one gives much thought to the literal meaning of the terms. They've become conventional designations or brand-names.
If a doctrinaire Protestant refers to a member of the Roman church as a "Catholic," that doesn't mean he's conceding that their sect is the universal church. That commits the etymological fallacy.
On the other hand, it is sometimes useful to refer to Catholics as papists or Romanists. That can spark an important conversation. That isn't abusive terminology. It's accurate. And it's useful to explain why that's accurate. Devout Catholics are disciples of the pope. Devout Catholics do belong to one particular denomination–among many.
So that's something we ought to decide on a case-by-case basis.