Yes. It would then be upon the government to do something about it, which would create some controversy, penalties for MS, and a political debate.

Same for refusing orders. It may change nothing, like in this story:

  > One commander ordered a sapper to put two old women in
  > a certain house ... and to blow up the house with them.
  > The sapper refused ... The commander then ordered his
  > men to put the old women in the house and the evil deed
  > was done. 

https://en.wikipedia.org/wiki/Al-Dawayima_massacre

But people sometimes still do it.

If it’s a lawful request, no. They can fight it but it’s a fight under US law, so if the law says they have to do it then that’s the outcome.

Microsoft (and other U.S.-based companies) are generally obligated to comply with government orders, even if the data is stored overseas