Everyone banned Huawei products despite the ability to pass laws saying Huawei must respect data sovereignty. They didn't ban US firms, because unlike China the USA was championing the rule of law at the time. Data sovereignty only works if the USA respects the laws of other countries, even though, just like China, they could coerce / bribe citizens and firms to bypass them. Such activity would be largely undetectable. Who is going to know if someone peeked at a secret document stored in Azure? There was a huge amount of trust involved in the arrangement.
The USA has now denounced the rule of law, is withdrawing the the institutions set up to champion it, and has shut down the ICCC's access to some services. The trust has gone.
This is all well within the realm of what governments can and do regulate. Want to do business in a country with their laws or not is the choice.
The EU (nay, perhaps every country) should be prepared to deal with Microsoft or AWS completely cutting them off from access to all their systems - what would be the cost and impact?
We are rapidly heading to not one Internet, but country-specific internets that may or may not bridge to other ones in some cases.
Realistically a US executive could be legally required to give an EU engineer a command that they legally couldn’t follow. At that point I guess we find out if the engineers’ national or corporate identities are dominant. I suspect the former in most cases, but who knows?
Google, AWS & Microsoft all nullroute the countries of Cuba, Iran and North Korea. Google also nullroutes Crimea.
So by using a cloud provider, you are participating in the embargo of Cuba.