It's not just the corporations as a whole that are an issue. It increases the insider risk footprint of that data to include your cloud provider's employees as well as your own. Amazon, Microsoft, and Google almost certainly employ agents of your adversaries (including US agents working without their knowledge) who have weird attack vectors and now have to be part of your threat model.

And the government has lots of leverage it can use against Amazon and MS if they use it in a way the government doesn't want. EU govts don't have that

US Government leverage: $200,000 fine, appealable.

US Government leverage: FISA secret court, prison time

Not with this current government.

touch the right HSM in one of these facilities and you get to know what it's like to disappear

"That's a nice little monopoly you have there. Would be a shame if Department of Commerce decided to investigate it."

You're assuming the people who handle it for the government weren't working at Amazon and Microsoft a year ago, and won't again be working for Amazon and Microsoft a year from now.

The government doesn't have leverage. The government is Amazon and Microsoft's leverage against others.

I am sure both companies have NDAs and contractual agreements in place that can be enforced and monitored.