I tested SharePoint auto-trimming behavior against files with and without retention labels. The results show that files without a retention label are trimmed as expected, while files with a retention label behave more like retention policy items and keep versions longer. For non-retention-label files, SharePoint trims old versions once the version count grows. Auto-trimming bypasses the recycle bin and removes older minor/major versions. However, files with retention labels appear to retain versions instead of trimming them.