Interestingly, it's not actually about being in the EU specifically, it's just about being in a jurisdiction with equivalent data protections. It's not a "must be EU" cloud requirement, it's a "must not be USA" requirement.

Canada, Brazil, Japan, India, and many other non-EU countries have GDPR-like data protection regulation that would be totally acceptable I think (IANAL).

The core problem is USA specific - either the USA needs to implement serious data protection laws where they can't blanket surveil foreign user's data, or EU businesses will have to move elsewhere.

I wouldn't be surprised if in future, similar local rulings appear in Canada/Brazil/Japan/Indian/the rest of the world for businesses based there too. It might be a difficult few years for US-based cloud providers.