Tariffs and other trade barriers are the number one reason why Europe is still stamping out slabs of iron. A 20% tariff is pretty standard because the value-added-tax (VAT) is 20%. I've heard the paper work is not insignificant either. Then there is shipping costs.
Look at German ratchets; big heads, coarse teeth, few flex-head options, but they are still being made even though US and Taiwanese options are better. German wrenches; no anti-slip? No problem! You can still charge as much as Proto, Wright, maybe even Snap-on without offering anything new. Wera screwdrivers look great, but if Klein wasn't paying a 20% tariff to import to the EU, I bet more Europeans would be slinging Klein screwdrivers.
The Cold War deal that the US offered Europe, Japan and Korea was "we will help you rebuild and open our markets to you, and you do not have to reciprocate. BUT we all fight the commies together." The US government did not really seek to change that arrangement until Trump went around and got more equal trade terms.
Plenty of German and other European companies innovate as far as tools are concerned.
Knipex is a pretty hood example of a plier manufacturer coming out with new designs that improve tools.
VBW owned by Stahlwille is another example, although probably not quite as innovative.
Facom from France has been innovating with a large chunk of their tool lineup since they started.
There were also a number of innovative tool manufacturers in Britain, although a bunch of that sector seems to have died, or gone the niche industrial route maybe starting in the 1970s.
Stahlwille and Hazet both offer fine toothed ratchets now (80 & 90 teeth i think).
The other thing I’ve noticed with a lot of European tool manufacturers, is that niche tool designs continue to be manufactured and offered by a large number of European professional brands, decades after being designed.
This negates the necessity for “new” designs, that are mostly just reintroductions of tool designs from 50-120 years ago.
A large proportion of the higher end US screwdriver market has been taken over by manufacturers from Europe (Wiha, Wera, Facom, etc.) because those companies bothered to make screwdrivers with ergonomic handles, and precisely machined tips, and those screwdrivers wound up widely distributed from Industrial tool sources, as well as at stores like Sears.
This all happened while much of the US tool industry was still offering screwdrivers that didn’t look much different from each other, with turned acetate handles, and tips that in many cases were wanting as far as grip.
It’s not that there weren’t quality screwdrivers available from manufacturers like Snap-On, Williams, Zephyr, Proto and Apex, it’s that those were niche brands most hardware stores didn’t carry, so even people who wanted quality ergonomic screwdrivers were unaware of the better US brands.
As far as European tariffs vs US tariffs, that is an issue, although US manufactured tools do get sold in Europe.
Channellock, Estwing, Vaughan hammers, etc. all get exported to Europe.