Apple’s stated commitment to privacy is wonderful, but a commitment to privacy requires accepting the risk that private data may be objectionable in some manner. Cook appears to be advocating for privacy while also advocating for censorship, and it is difficult for those two concepts to stand together. If you are committed to protecting my privacy, that means that you also have no idea what’s in my data (or possibly even who I am), and it could be something which is objectionable to you or someone else. Apple seems to want to have it both ways—be seen as a privacy advocate, while at the same time retaining the ability to scan and prohibit content, or take action against customers who use Apple systems to store data which Apple or others may not like. Privacy doesn’t mean that Apple gets to review and approve your data, just as free speech doesn’t mean that only certain viewpoints are protected speech. Otherwise, privacy is indeed illusory.
Apple does encrypt most iCloud data at rest, but they also hold the keys so that they can decrypt it, with the exception of iCloud Keychain. The greatest risk to privacy here is probably the iCloud Backup feature of iOS devices, where otherwise encrypted information from the device (such as iMessage content) is stored and accessible to Apple via keys which they hold. Of course, savvy users can enhance privacy and security by using tools such as Boxcryptor or Cryptomator, but with some loss of convenience, as these tools are not fully integrated into the iOS experience.
It would be interesting to know how Apple would respond to an allegation that someone was storing objectionable content in a zero-knowledge encrypted vault which resides on an Apple system such as iCloud Drive. Would Apple demand that the accused reveal data to prove their innocence? Would they summarily kick the accused off of Apple systems? It would be an interesting test of Apple’s position on privacy in practice. One thing is almost assured, though: Apple would likely look through every piece of content they could access for evidence.
I have not read through all of Apple’s EULAs, but these issues are likely addressed at least broadly in those agreements. The bottom line is that the most privacy and theoretically least risk results from retaining physical control of your data; once you give it to someone else, you give up control [usually] in exchange for convenience. This is why the insidious data harvesting practices of companies such as Facebook and Google are such a risk to privacy—in most cases, the user has no idea what information is being collected or how it is being used. Of course, the same is true with apps and websites in general, which is why Apple’s efforts toward data collection transparency in these areas are helpful.