Like I mentioned before, Azure ExpressRoute uses dynamic routing between your network and Microsoft via BGP protocol and BGP provides automatic and flexible route prefix updates. The ExpressRoute gateway will advertise the Address Space(s) of the Azure VNet, you can't include/exclude at the subnet level. It is always the VNet Address Space that is advertised.
For example:
Let's say : Your Vnet address range is 10.10.10.0/24 and GatewaySubnet is 10.10.10.0/27 (where you have an existing S2S VPN)
But your on-prem range overlaps with this address space.
So you add a new address space say 10.20.0.0/24
And deploy ExpressRoute gateway in your existing GatewaySubnet "10.10.10.0/27".
What happens to the routing:
ExR gateway will advertise both 10.10.10.0/24 and 10.20.0.0/24 to the Microsoft Edge routers.
So, even if you keep the old address space for just GatewaySubnet, it will still get advertised to your On-premises and the On-prem Address range will get advertised to us. Overlapping addresses is never recommended as you never know how they will cause an issue.
In your case, the ExR gateway instances and the tunnel IPs will be from the overlapping address space. So the Microsoft Edge routers will have one route which is from On prem and another which is from gateway. So it will likely cause issues for the Microsoft edge router in deciding how to handle the traffic.
Hope this helps!
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