When joplin cloud hits a storage limit, what does it do?

If there's an attachment >200mb, or one hits the 200GB total storage limit, what does joplin cloud do?
Presumably error messages - are they easy to sort out?
All of the data is still stored locally, right?

Attachment over 200 MB will simply be blocked, so it won't be possible to upload them. You'll get a message about it in the app, and you'd probably want to delete that attachment or somehow compress it.

The account essentially becomes read-only when you reach the storage limit - you can still delete notes or attachments to make room but you won't be able to upload more.

If I recall correctly the 1st step is updating remote which includes uploading and deleting. And if an upload comes first and fails due to lack of space, will the sync continue to deletion?

It's changed now, and the first step is deletion. So the user can delete some items to unblock the process.