There are a few people in my social bubble that are not technical at all, but heard a few bad things about WhatsApp and that's why they are using Signal. Nothing more, they do not know how it works, they do not know who provides it.
Seems to me one of the main things that got people to move away from Whatsapp en masse a few years ago was a rumour that they'd added a backdoor to it similar to the one Sweden is thinking of demanding. If an unfounded rumour did that much, the real thing might do substantial damage to Whatsapp as well if they were to go along with it. It probably wouldn't completely demolish it, as it would for Signal — or at least its demise might take longer.
While that's generally true, one of the main reasons why people choose apps like Signal is the privacy. People that aren't aware and don't care generally wouldn't have switched to Signal in the first place.
I agree that it would destroy the reason many people use it, but they aren't outlawing Signal specifically. What they are doing is arguably worse, but this isn't an "anti-Signal" action.