I use iCloud Drive to share files between MacBook Pro and iPhone. Syncing change from Mac to iPhone is fine but the opposite is not. When I change something on my Mac the changes are reflected on my iPhone automatically. When I change/add a file from the iPhone, the changes are not automatically downloaded on the Mac.
When there is a new file added from the iPhone, the Mac shows the new file in Finder. However, the file content is not downloaded. It shows the solid-outline cloud item next to it. Hovering the icon shows Downloading tooltip. It never downloads though unless I click Download Now from the context menu. This behavior happens consistently across all files and folders; whether the file is created manually in Finder or through apps such as Obsidian.
In my iCloud setting, the Optimize Mac Storage option is unchecked. And I have plenty of space. All the files in question are small text files so space isn't the issue.
My Mac is running Monterey 12.6.3 and the iPhone iOS 16.3.1