iCloud doesn’t let me downgrade

I have a 2TB plan and want to cancel my subscription. Now Apple is asking me to delete my files from iCloud, but if I do, they get deleted from my iPhone.

Does that mean Apple has kidnapped my files and I will have to keep paying for iCloud forever, unless I delete all my files? I have almost 1TB of files on my iPhone and thought iCloud would offer me a cloud storage service similar to Google Drive. Is there a workaround? How can I unsync my files from iCloud without losing them from my phone?

Thanks a lot for the help. I never used iCloud before, so I’m a noob at this, sorry for such a basic question, but I need the help. Is iCloud just a scam that holds our files hostage? Do we pay to have our files kidnapped? I am really confused.