Volvo never played this game. The tow rating for small sedans in the US is as high as in Europe. While I don't max it out or come even close to the limit, I hauled plenty of loads with a small S60 and a Featherlite aluminium trailer.

Any differences in regulation w.r.t towing capacity between the US and EU?

It's been a few years since I last looked into it, but my recollection is that in Europe (or at least the UK) it is normal to balance the trailer to put less tongue weight on the hitch, which means you can tow a heavier trailer but have less stability at highway speeds (which they compensate for by having lower speed limits when towing). In the US typical trailer loading guidelines recommend putting more of the weight forward of the axle(s) for more tongue weight, which usually means the trailer will not sway even at speeds in excess of what the trailer tires are rated for.

In practice, a vehicle's safe towing capacity is usually not limited by the engine or drivetrain, but by the ability to stop the trailer safely. Brakes on the trailer itself help, but the big problem is that hard braking shifts more weight forward onto the hitch (trailer dive) and tends to lever the front wheels of the tow vehicle up, reducing their braking ability and in extreme cases eliminates your ability to steer while braking. A weight-distributing hitch counteracts this, but in the US light passenger vehicles are seldom rated for use with such a hitch. Towing at a lower speed also somewhat reduces this danger, by quadratically reducing the kinetic energy you need to shed in an emergency stop.