In case of the diff viewer in VS Code, the goal is to present the changes to the user in a helpful way, so that the user quickly understands what changed.
In case of the merge editor, the diffs should reflect the actual edits as close as possible, so that non-conflicting edits cause non-conflicting diffs, which then allows a non-conflicting merge.
In case of the merge editor, the diffs should reflect the actual edits as close as possible, so that non-conflicting edits cause non-conflicting diffs, which then allows a non-conflicting merge.