1. The DMA is striking at the heart of their revenue model by targeting the app store. Tim Cook testified before Congress and said that Apple would be "giving up our total return" on their intellectual property if they did not monetize the app store aggressively. So my read is that this move is intended to prevent a shift to PWAs as a way to get around the new policies.
2. Legislation like the DMA, if successful, could spread to other countries, much in the same way the link tax spread from Australia to Canada. I think Apple has an explicit goal to make this legislation as painful as possible, for both the legislators and the citizens, so that other countries do not attempt to pass similar laws.
There was a time between 2007 and 2011 where I bought Apple computers and was a big fan. These days, despite the very cool new processors Apple has released, it's very hard for me to see them as anything other than antagonistic. What a fall from grace.
Clearly, they're just making a point here, hurting developers and users just to spite a regulator.
What they are signalling to me as a developer is that mobile devices are just not a reliable platform. Better do as much as possible on the server.
However, I'm on their side in this case. I run a business. If having a feature comply with some regulation meant implementing a whole infrastructure I don't have to serve a minority of customers, I would also abandon the feature.
They could have implemented this feature securely, but they chose to use the opportunity to make a point instead.
All other OSes support web app installation from any browser, including macOS. This is a lot more secure than installing any native app.
This is just Apple spreading FUD as an excuse to keep preventing web apps from competing with native apps.
That's always how they spin their FUD. They already have an app sandbox in place for all fo their apps. Sideloaded, PWA, or not.
Evil does indeed lead to real security and privacy concerns.