How do you reduce storage from 1 TB to 200 GB

Please provide some more details on your requirements.

Do you have a Microsoft 365 subscription, and if so, do you use the Office apps that come with the subscription or do you just use the subscription for online OneDrive storage?

If you do use the Office apps that come with the Microsoft 365 subscription, then you cannot reduce your storage, because the Microsoft 365 Personal or Family subscriptions come with a set amount of storage.

If you do not need to use the Office apps that come with the Microsoft subscription, the only other option provided is the cheaper Microsoft 365 Basic subscription, that comes with 100GB of OneDrive storage, but does not allow you to install and use the Office apps locally on your PC.

https://www.microsoft.com/microsoft-365/p/microsoft-365-basic/cfq7ttc0ktxs