Make default settings apply (#15354)

packages/cli/src/config/settings.ts

@@ -424,6 +424,24 @@ export function migrateSettingsToV1(
   return v1Settings;
 }
 
+export function getDefaultsFromSchema(
+  schema: SettingsSchema = getSettingsSchema(),
+): Settings {
+  const defaults: Record<string, unknown> = {};
+  for (const key in schema) {
+    const definition = schema[key];
+    if (definition.properties) {
+      const childDefaults = getDefaultsFromSchema(definition.properties);
+      if (Object.keys(childDefaults).length > 0) {
+        defaults[key] = childDefaults;
+      }
+    } else if (definition.default !== undefined) {
+      defaults[key] = definition.default;
+    }
+  }
+  return defaults as Settings;
+}
+
 function mergeSettings(
   system: Settings,
   systemDefaults: Settings,
@@ -432,16 +450,18 @@ function mergeSettings(
   isTrusted: boolean,
 ): Settings {
   const safeWorkspace = isTrusted ? workspace : ({} as Settings);
+  const schemaDefaults = getDefaultsFromSchema();
 
   // Settings are merged with the following precedence (last one wins for
   // single values):
-  // 1. System Defaults
-  // 2. User Settings
-  // 3. Workspace Settings
-  // 4. System Settings (as overrides)
+  // 1. Schema Defaults (Built-in)
+  // 2. System Defaults
+  // 3. User Settings
+  // 4. Workspace Settings
+  // 5. System Settings (as overrides)
   return customDeepMerge(
     getMergeStrategyForPath,
-    {}, // Start with an empty object
+    schemaDefaults,
     systemDefaults,
     user,
     safeWorkspace,