It seems that the problem was macOS outputting YCbCr instead of the correct RGB. In the OSD Menu under Color- Input Color Format, my U4021QW showed "YCbCr" instead of "RGB".  I searched around and found other macOS users had the same problem. I was able to solve it by installing and running this script.
Since a few days I now experience extreme flickering on my U4021QW which basically makes using the U4021QW a pain. I can get rid of the flickering if I manually lower Brightness and Contrast using DDM to about 10/25 which makes the U4021QW basically useless. I have the following setup in place. Nothing in the hardware setup has changed since I bought the U4021QW about 8 months ago: The U4021QW is connected via the Thunderbolt 3 dock. But the flickering persists even if a connect the MacBook directly and reboot everything again. It seems like there may be something odd with the backlighting of the U4021QW? What to do?
U4021QW, MacBook Pro M1, flickering FIXED