The mining difficulty adjusts according to a specific algorithm. The difficulty adjusts such that, regardless the hashrate, the average time between blocks is approximately 10 minutes. The difficulty also only adjusts when there are changes to hashrate. As miners go offline, it will adjust down to become easier to mine. As miners come online, it will adjust up to become harder.
So in this scenario, a lot of miners will have gone offline and the difficulty adjusted down. This has no effect on the rate that blocks are produced, so this has no effect on the issuance of Bitcoin nor the time it takes for transactions to become confirmed.
What it does have an effect on is the security of Bitcoin. The immutability of the blockchain comes from the fact that it is hard to rewrite the blockchain. It comes from the fact that in order to change blocks in the blockchain, the same amount of work must be done. With a lower difficulty, the amount of work done on each block is lower, so the amount of work required to change that block is lower. Thus with a lower difficulty, it becomes easier for an attacker to change the blockchain and perform 51% attacks.
In a scenario where someone can snap their fingers and magically cause the difficulty to change, the effects would of such a change would be extremely bad. It wouldn't magically cause hashrate to go offline, rather they would stay online at a lower difficulty. This would mean that blocks are found way faster which greatly increases the risk and likelihood of stale blocks. This would, in general, not be good for Bitcoin. Since the difficulty is magically lower, more people would probably start mining because it is easier for them to make money when the difficulty is low. Additionally, the difficulty would just eventually adjust back up to where it is.
It is important to keep in mind that the difficulty has an effect on miners, and that miners have an effect on difficulty. When the difficulty is low, more miners will come online because it is easier and thus more profitable to mine. As more miners come online, the difficulty will increase. Eventually, the difficulty will reach a point where miners go offline because it is now harder to mine so mining is less profitable. So then the difficulty will drop. This will form an equilibrium.