It's especially funny that Microsoft has been swearing up and down that they can offer "sovereign" infrastructure in Europe, and yet the moment Trump comes calling they trip over themselves to implement his sanctions against the ICC.
However turning this on reduces the feature set of m365 massively so almost nobody actually uses it.
Vital government functions cannot be allowed to run on this type of infrastructure, it's ridiculous.
In the end the question is very simple, aside from the rare idealist company all companies seek to earn money. How big of a hit would they be willing to take to defend the rights of their foreign customers?
As a European by this point I find US companies about as trustworthy as Chinese ones, if not more so. With Chinese companies you have the Chinese government as a potential attacker. With US companies you have the US government as a potential attacker. Both is bad, but with US companies I feel that they also have a higher tendency to fuck you over as the customer or to change the deal after the fact. Sure usually they should respect EU law when doing business in theEU, but how well is that working out?
In the long term this is probably more of a risk because the Chinese strategy actually has long-term planning behind it while the American one is random and a lot of their actions harm themselves more than anyone else. China is the best in the world at playing the long game.
But in the short term the Chinese are more dependable.