The root font size is 16px. What font size does this produce on a 1000px-wide viewport?

25px is right. clamp(min, preferred, max) uses the preferred value as long as it stays between the two limits. vw means 1% of the viewport width, so 2.5vw of 1000px is 25px. That is between the minimum of 16px (1rem) and the maximum of 32px (2rem).

32px is the tempting wrong answer. The browser uses the maximum only when the preferred value is bigger. For example, on a 1600px viewport, 2.5vw would be 40px, so it would be capped at 32px.