If EU countries don't like it, they may also ban US tech companies as they're sovereign countries that don't need to bow to foreign corporations.
The point is to regulate social media for European citizens. They set the rules. If facebook or twitter cannot follow them they will pull out of that market allowing space for a local platform to take over.
It would be interesting to see how that pans out for social media, since they tried with Google News and that, if I was correctly informed, hurt local publishers rather than helped.
In the short term, sure it would. If you tear up one field in the middle of planting and plant another, it'll hurt short term; 10 years later it'll be a funny story.
Markets love a vacuum and it would be an opportunity for local players to dive in.
Sure but the EU, like China, like Russia are different jurisdictions with different laws. Their countries, their rules.