President Biden and populists of both parties are waging a rear-guard action to bar the sale of United States Steel to a Japanese firm. The attempt to thwart the workings of free-market capitalism is ideological. This is not to say that the fall of a titan of American industry like U.S. Steel should be shrugged off or cheered. It’s a moment to mark how America’s rivals — especially Communist China — tilt the rules of global trade to their advantage.

The deal warrants “serious scrutiny,” is the warning from Mr. Biden’s economic adviser, Lael Brainard, over risks to “national security and supply chain reliability.” That’s window-dressing for Mr. Biden’s drive to placate labor unions. The sale is “absolutely outrageous,” Senator Fetterman says, vowing to protect union steel labor. GOP members of an emerging neo-protectionist faction in the Senate are balking, too. 

Senators Vance, Hawley, and Rubio urge Secretary Yellen to deploy a federal trade agency to stop the sale in its tracks as a matter of “national security.” These solons seem to think it’s still 1944 and we are still at war with the Empire of Japan. Plus, too, at a time when America is “courting direct investment from Japan,” the FT’s Leo Lewis notes, and “pushing the ‘friendshoring’ of supply chains,” sowing “mistrust of Japan is a perversely odd strategy.” 

It’s also hypocritical, Mr. Lewis observes, since America has long urged Japanese firms “to apply more aggressively profit-driven, shareholder-first standards,” and not close themselves off from foreign investment. One can view the sale of U.S. Steel to a more successful foreign rival as a case study in how free markets work. Yet America only benefits from capitalism’s creative destruction when international rivalry takes place on a level playing field.

In the steel industry, the market has been warped on both sides of the border. Protectionists here, the Wall Street Journal notes, “miss the irony that their tariffs and industrial policy” led to “the foreign takeover of an iconic U.S. manufacturer.” The Journal editors note how federal overspending on “public works and green energy” has been “goosing domestic demand for steel” even as “tariffs protect U.S. manufacturers against foreign competition.”

Much of that competition, though, is from China, which deploys its steel industry as an instrument of state policy — a far cry from how free markets are supposed to work. American steelmakers have long decried how Beijing subsidizes its domestic steel industry “in the form of an undervalued currency,” the Congressional Research Service observes, “export rebates and/or quotas,” and state-aided financing. No wonder China is now the world’s top steelmaker.

As President Trump put it, China “is cleaning our clock right now” when it comes to steelmaking and other foundations of America’s former industrial might. Decades of failure to stop China’s trade and currency manipulation is bearing fruit in the form of lost jobs and a hollowing out of our once-great manufacturing heartland. Yet the steel industry’s woes can’t be pinned entirely on China, as columnist Salena Zito, based at Pittsburgh, writes. 

America’s steel industry, Ms. Zito notes, has been ailing for decades. As far back as 1983, the jobless rate at Steel City hit 18 percent, she points out, as firms like U.S. Steel reeled from a collapse in domestic steelmaking, “crippled by automation, trade, union strife, inattention to emerging technology, and poor corporate leadership.” U.S. Steel in particular, economists say, failed to keep up with innovations and lost ground to more nimble rivals.

Even so, Ms. Zito laments steel’s decline. She observes that young people who have never “walked into a mill” still grasp “the idea that when you did,” there was a sense of  being “part of something that was bigger than yourself: You were part of the building of America.” Suspending the rules of capitalism to save U.S. Steel would be a hollow victory. Getting our steel industry back on its feet will require overhauling the terms of our trade ties with China.