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.

For me, it depends on the job description. I remember way back (like way, way back), Google mysteriously placed an ad that led would be problem solvers to Google Labs:

https://cnet.com/tech/...

While others solved it the mathematical way, one guy used a Perl script + Net::DNS to find the hostname that led him to Google.

If you're a recruiter, you can determine the strength of each candidate this way.

But if I'm doing the interview, I wouldn't ask someone to write me a sorting function. Probably a variation of questions you see on Leetcode or [insert your preference here].