Governments wouldn't have much trouble shutting down Tor nodes in their own territory, as far as I know, since they can trace the IP addresses back to physical

Governments wouldn't have much trouble shutting down Tor nodes in their own territory, as far as I know, since they can trace the IP addresses back to physical computers. Generally, they don't, which is the "uneasy coexistence" aspect. Perhaps they have legal reasons for not shutting it down, such as the US constitution, or perhaps they find it useful for their own purposes to keep it running, or perhaps they just don't care because it's not used widely enough. I can imagine an outcome in which the illegal information is driven further underground and no longer accessible at publicly known locations. Like the hidden ftp sites that supposedly exist in the "Warez scene". The trend that most people no longer keep their own data on their own devices, but use streaming sites and cloud servers, will presumably help keep information under control.