that error you're encountering indicates that terraform is attempting to authenticate using the azure cli as a user, but it doesn't support using the azure cli for authentication with a service principal or managed identity. Since you're using a system assigned managed identity, you need to configure terraform to authenticate using the managed Identity directly, rather than relying on the azure cli. Take a look an docs from MSFT according that, and if its does not help you push me I would try to explain how to fix it.
Terraform Authentication with Managed Identity
Troubleshoot Managed Identities
Managed Identity in Azure Container Apps
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rgdds,
Alex