But they probably also lose a lot of money from all the people who now won't need to upgrade to a paid storage plan.

Considering data stored for a long time and very rarely accessed is effectively free in a modern datacenter (since disks are all IO limited not capacity limited in cloud deployments), I reckon they're losing money with this change.

There's a good chance they're doing it because their lawyers have told them to - clicking the "send to trash" button could be considered a GDPR deletion request, and if Google leaves that document in the trash forever, they could be found in breach of GDPR rules.