Hello!
It appears that your Mac is storing more information on-device rather than in iCloud because there is not enough space in your iCloud account to store all of the data on your Mac. Since your Mac has over 200GB of data, which is over your iCloud storage limit, it is not able to upload it to iCloud and optimize your storage on your Mac.
You could upgrade your iCloud+ plan to one with a higher storage capacity to upload all of the iCloud compatible data you have on your Mac. Learn how to upgrade your plan here: Upgrade to iCloud+ - Apple Support.
If you decide to upgrade, here is how you can store files in iCloud Drive on Mac: Store files in iCloud Drive on Mac - Apple Support.
Otherwise, you can try freeing up storage space on your Mac by manually deleting large files and other items. Apple has another great guide on this here: Free up storage space on your Mac - Apple Support.
I hope this helps! If you have any more questions or concerns, feel free to leave a reply.
-Drake