NPM package cannot be used as a JSX Component – Type errors

Had the same issue.
Just add this

"resolutions": {
  "@types/react": "17.0.2",
  "@types/react-dom": "17.0.2"
},

to package.json file and run yarn command.

UPD: Just a bit detailed answer:

@types/react-dom has its own dependencies and one of them is @types/react with a version set to '*' – a major release, that now, probably, refers to 18.

Even if you specify some strict versions in your package.json (without ^) parent package might install its own duplicates of packages that you are already using for its own purposes.

By using resolutions we are specifying strict restrictions for dependencies of dependencies.

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