There are so many things that can happen. Since tariffs are percentual, Microsoft could lower prices to avoid that companies will migrate to European alternatives.

In an all-out economic war, anything could happen. The source code of Microsoft products probably exists somewhere in Europe (since they have European offices) and definitely binaries, since it's run on European servers. Once nobody plays by the rules anymore, all bets are off.

That said, a trade war would hurt both badly and it would be an epic fail on the side of the US administration. (Since the EU would not start such a trade war by itself.)