-XPackageImports breaks module hiding

Summary

-XPackageImports breaks hiding on each module that it is used.

Steps to reproduce

Sample module:

❯ cat Foo.hs
{-# language PackageImports #-}

module Foo (String) where

import "base" Prelude hiding (String)

data String = String

Attempt to build:

❯ ghc Foo.hs
[1 of 1] Compiling Foo              ( Foo.hs, Foo.o )

Foo.hs:3:13: error:
    Ambiguous occurrence ‘String’
    It could refer to
       either ‘Prelude.String’,
              imported from ‘Prelude’ at Foo.hs:3:8-10
              (and originally defined in ‘GHC.Base’)
           or ‘Foo.String’, defined at Foo.hs:7:1
  |
3 | module Foo (String) where
  | 

Even though 'Prelude.String' is hidden. Removing the use of -XPackageImports resolves the issue:

❯ cat Foo.hs
{-# language PackageImports #-}

module Foo (String) where

import Prelude hiding (String)

data String = String

Building the version without -XPackageImports:

❯ ghc Foo.hs
[1 of 1] Compiling Foo              ( Foo.hs, Foo.o )

Expected behavior

I would expect that both versions of Foo would build just fine.

Environment

• GHC version used: 8.10.2

Optional:

• Operating System: NixOS