This is not suggesting changes to AOE3.
The peculiarities of early modern warfare, compared to previous ages, include:
(1) Huge imbalance across regions, especially after 18th century. The West developed so rapidly that they outclassed other parts of the world.
(2) Decline of armour. In any earlier time setting, one could legitimately use the “heavier = stronger” principle for unit (visual) designs, but not in early modern ages. It looks weird if a cavalry becomes stronger while losing armour. That’s why European civs start with a Napoleonic hussar as the standard cavalry, and the fully armoured knight who is supposed to be a very early unit and quickly become obsolete is an Age 4 super unit. Also the defense stats of AOE3 is purely gameplay-based and has no relation to how the unit looks.
Here are some ways to make a balanced traditional RTS (which is to say, without more complex mechanics like squad-based control or morale, etc.) while still maintaining these real-life characteristics:
(1) Gunpowder: no they are not the same “damage type” as arrows or javelins. Gunpowder weapons could deal similar damage values, but they pierce armour. That gives them an edge against archaic units at range. Also, the arquebus should be a less powerful version of the musket, unlike the long range rifle equivalent in AOE3 (which is understandable because before bayonets arquebusiers assume a “skirmish” formation, but that is not the same kind of “skirmish” as the rifle-wielding sharpshooters in 19th century).
(2) Armour: archaic, armoured units are heavier which means they have better defense but lower hp. So they can be very effective in melee when used properly, but still falls to modern armies at range because gunpowder weapons can pierce armour. On the contrary, unarmoured modern units have lower defense, but higher hp reflecting better morale and training.
(3) Formation: similar to AOE3, skirmishing units have better ranged defense. Switching to loose formation also gives better ranged defense but makes the unit more vulnerable to charges. Lance-wielding cavalry have better charge bonuses but less effective in melee.
(4) Another thing that is usually overlooked by most RTS: the availability of units. A medieval knight may have much better equipments than an average Napoleonic hussar. A longbowman may beat a musketeer. But the former takes much longer training time to become proficient while the latter could be “mass produced” with standard drills. That’s a main advantage of modern armies compared to feudal armies. So archaic units takes longer to train, while modern units have more technological requirements and cost more.