The latency isn't from the cipher; it's from touching the data an additional time. A NIC with inline encryption adds negligible latency but Google probably doesn't have those.
There are a number of technologies that support this kind of thing at the kernel level, but 1) layering these onto an existing SDN is not trivial, and 2) the extra encoding/decoding will absolutely have a performance impact if you're trying to do it at line rate on a 10Gb NIC, e.g. see https://www.weave.works/blog/weave-net-performance-fast-data....