Now that we have GitHub Copilot, what happens if during an interview, I am asked to implement a sorting algorithm, say merge sort. If I guide the AI to do it for me, does this count as cheating? How will you feel as an interviewer?

I feel that implementing sorting algorithm is disrespectful for me, you and whole programming community.
It doesn’t teach you anything but shitty data manipulation that is no use in real world.
It’s like going to library to search for a book and don’t pick something to read but play with book cards.