Google knows users care about their privacy, and it made the promise in its terms precisely for that reason. People pay attention to this stuff, as the popularity of this story shows.
Therefore, it's generally not going to be in Google's interest to break its own terms.
So what's going on? Did a Google employee simply mess up? Is the reporting not accurate or missing key details, e.g. Google truly is legally prohibited? Or is there some evidence that the Trump administration was putting pressure on Google, e.g. threatening to withhold some contract if this particular person were notified, or if Google continued notifying users belonging to some particular category of subpoenas?
Because Google isn't breaking its own terms just for funsies. There's more to this story, but unfortunately it's not clear what.
Do Google users care about their privacy? I'd expect not, given that Google is (and hasn't been shy about telling us about it) reading all their emails in order to provide more targeted advertisements.
And, as I mentioned, Google hasn't been shy about saying that's exactly what they do (prioritizing their ad revenue over their users' privacy), so I have to assume that Google users don't care about their privacy.
If they did care about their privacy, they'd self-host their email on hardware they physically control.
That's orthogonal to Google giving up data to the government, with or without notifying the user(s) in question, except that the above makes clear what we already know: Google doesn't respect the privacy of their users.
Does it know? And do users really care? Popularity on HN isn't popularity everywhere.
I'd wager most people don't care enough to move away from Gmail.
But even if they did, unfortunately this isn't the only variable a business is solving for. Corporations will generally just pick between the least unprofitable of two evils, not the lesser of.