This is not an EU law anyways, this is snakeoil companies acting like having their data located in the EU will change who has access to it and will make it "GDPR compliant" (it wont since the CLOUD ACT still applies)
I think the keywords are "trusted" and "citizens' rights". US burned a lot of trust in the last few years, and what's happening with ICE doesn't really scream "citizens' rights" either. I can see why many "trusted foreign partners" would now think twice rather than help out the US compared to just 5 years ago.
As a EU person, I'd really like to not have ties with US when possible, and I'd really like to foster the economy of non-US alternatives.