Comparing to Python 3.6, we can see that the code to update the C global flags from the environment variables used to live directly in _PyInitializeEx_Private: https://github.com/python/cpython/blob/9d85856044a2c7d681ea38b5ff99af375b228a0f/Python/pylifecycle.c#L305

In Python 3.7 that section (https://github.com/python/cpython/blob/3.7/Python/pylifecycle.c#L913 ) currently calls _PyCoreConfig_Read instead, which *only* updates the config struct - it doesn't update the C level global variables.

By contrast, Py_Main eventually calls https://github.com/python/cpython/blob/7cbde0e09daba4259565738e48f141851287fe29/Modules/main.c#L1394 which handles writing the state from the config struct back to the global variables.