VSCode let’s you do that, with the .vscode folder either globally or locally per-folder/project, for what it’s worth. Unless I misunderstood what you meant!
At least at the time, the format was really not conducive to it, especially re plugins that should be installed, and on macOS since it used Electron's config mechanism it all got stuffed in ~/Library/Application\ Support/VSCode.app/Resources/macOS/Content/package/config/vscode.config or something horrific.
I primarily use Linux, but I don't want something as crucial as my editor to unavailable or differently configured (so I can't just clone dotfiles) on macOS which I might sometimes use. Which, again, last I checked, means no Electron for anything that 'crucial'.
(I think it's fair enough for maintainers of these things to defer to Electron on config locatio, but it's unfortunate that Electron decided what 'platform standard locations' are irrespective of what the tool is, whether $XDG_CONFIG_HOME is explicitly set, and what other tools do or user preference is.)
Again for what it's worth, that's also been added, and I certainly haven't had that issue on macOS myself? It loads it from the project I have open, or my home directory base settings.json
