You merge a site collection with another site collection and you get the following message:
The source site collection's external sharing setting is more permissive than the destination's default setting and will not be migrated.
You copy or merge a site (not a site collection) and get the following message:
The destination sharing setting is more permissive than at the source. You may need to manually review these settings at the destination to ensure that migrated data cannot be shared improperly.
When you merge a site collection into another one and the destination has a more restrictive sharing setting enabled the app will not try to replicate the source's sharing setting.
This is to avoid your destination data to suddenly get shared improperly.
When you copy or merge a site (not a site collection), you get the second warning because you are not connected to your admin center and the app is unable to update the setting at the site level.
Because the destination has a more permissive sharing setting than the source, we suggest to review the sharing setting in the destination so that the source data does not get shared improperly.
For more information on sharing settings click here.