Aren't the Chrome passswords part of the (optionally) E2EE encrypted data?
It might not be the default but AFAIK they definitely _can_ be E2EE encrypted.
I think Google shipped another underbaked product here. They have E2EE implemented for Chrome sync data already. They should have just used that rather than going with whatever system they decided. Adding Google Authenticator to the Chrome Password Manager is probably much more useful than having it as a standalone app.
Also I'm sure there's many use cases for Authenticator when you're not already in Chrome or even in a web browser. Stuff like entering a 2FA key when logging into your VPN. It'd be awkward in that situation to pull up Chrome and find some obscure menu just to get your VPN's 2FA code.