tsconfig.json is ignored if it isn't in the root of the vs code window.
For example:
file: 'file:///Users/yuval/rylo/nuxtsc/a/pages/index.vue'
severity: 'Error'
message: 'Cannot find module '~plugins/nuxt-class-component'.'
at: '17,23'
source: ''
file: 'file:///Users/yuval/rylo/nuxtsc/a/pages/index.vue'
severity: 'Error'
message: 'Experimental support for decorators is a feature that is subject to change in a future release. Set the 'experimentalDecorators' option to remove this warning.'
at: '21,1'
source: ''

git clone https://github.com/johnlindquist/nuxt-typescript a
git clone https://github.com/johnlindquist/nuxt-typescript b
code .
# now open pages/index.js and see the errors
Based on this code it seems to me there is no support to do this currently
After thinking through it, it's impossible to do this.
For a workspace, I can't look at each tsconfig.json and create a language service based on it. In TypeScript, you do tsconfig.json per project, and tsconfig.json has to be located in the root of the proejct.
Instead, the way you should work on two Vue codebases together is to use the new multi-root https://code.visualstudio.com/updates/v1_18#_support-for-multi-root-workspaces feature.
I'll implement #424, where I spawn one Vue language service for a workspaceFolder if it contains a package.json with vue in it.
I stumbled over this issue as well as I was wondering why I kept getting experimentalDecorators warning over and over even so I added that to my tsconfig.json. Creating a "*.ts" file beside the vue file with the same code handled it correctly.
I also found https://github.com/Microsoft/vscode/issues/3772 which explains the "same" issue on the "official TS" side and a comment from egamma from Microsoft stated that it is explicitly supported by vscode and should work. If that is vscode behaviour then I think vetur should also support it in the same way.
However I can understand if there are technical reasons why this can't be implemented.
@octref I'm using yarn workspaces with lerna, and one of my repo is next.
Before add the folder:

Your solution works perfect for me!
@octref Are your views from 2017 still the same? "won't fix" ? You mentioned here https://github.com/microsoft/vscode/issues/68343#issuecomment-463091232 that you need to revive this issue.
@Minigugus provided a PR: https://github.com/vuejs/vetur/pull/1734 that seems to address this issue.
Mono repos are gaining popularity with lerna/yarn workspaces. VSCode's TS support seems to support non-root tsconfig files no problem in my other packages/* projects.
Most helpful comment
@octref Are your views from 2017 still the same? "won't fix" ? You mentioned here https://github.com/microsoft/vscode/issues/68343#issuecomment-463091232 that you need to revive this issue.
@Minigugus provided a PR: https://github.com/vuejs/vetur/pull/1734 that seems to address this issue.
Mono repos are gaining popularity with lerna/yarn workspaces. VSCode's TS support seems to support non-root tsconfig files no problem in my other
packages/*projects.