I find that neither pragmatic nor ethically sound.
If you're in a security alliance with countries you share values and goals with, how can you not apply different standards in terms of data sharing? And how can you not react somewhat differently to any transgressions, mistakes and imperfections?
I know Trump has made this very difficult by making his personal whims indistinguishable from the interests and commitments of his country. In my view this is a form of corruption that does massive damage to the U.S. And yes, democratic control over security services has been rather tenuous at the best of times.
But I still see many good reasons not to impose broad economic sanctions on allied democracies. And I do see good reasons to side with them against completely illegitimate regimes that use their security services to keep themselves in power without a democratic mandate.
Of course there are many grey areas and a lot of valid criticism. But asking for Europe to officially impose economic sanctions on the U.S is not a proportionate reaction to that. The economic damage would far outweigh any additional freedom or security.
If you refuse to apply a degree of pragmatism and proportionality, other countries would then have to impose economic sanctions on Germany for their use of Staatstrojaner. Essentially, all cross border trade in digital goods and services would have to end globally. That can't be a good idea.