The specific regulations here

> EU officials must revisit the hastily agreed trade deal with the US, where the EU stated that it “intends to accept” lower US vehicle standards, say cities – including Paris, Brussels and Amsterdam, and more than 75 civil society organisations. In a letter to European lawmakers, the signatories warn that aligning European standards with laxer rules in the US would undermine the EU’s global leadership in road safety, public health, climate policy and competitiveness.

They point to many things and not only the size of cars - like fewer approvals, lower pollution controls, fewer safety measures.

Some of them increase utility (like people might prefer bigger cars) and others decrease cost.

Have you ever heard of the term "negative externalities"?