1. Chinese companies are extensions of the state in a way not analagous to anything in the developed world. This creates a valid national security interest in giving Chinese companies access to telecoms (Huawai), personal information (TikTok) and many other areas; and
2. There is no huge market opportunity in China for Western companies so these companies should stop pressuring politicians to look the other way on China (and, arguably in some cases, to kowtow to beijing). The Chinese government will ensure no Western company "wins" against homegrown companies, all the while dangling that carrot of 1B customers and handout out enough crumbs to keep interest.
As for this lawsuit, I'm no lawyer so can't speak to its merit but consider this: trade agreements (WTO/GATT) call for reciprocity. In trade terms, I'd say the US is well within its right to deny access to the US market to Chinese companies in the same way US companies are denied access to the Chinese market.
Enforcement of censorship in China is painted as just obeying local laws. Ok, but what's to stop the US arguing that they require companies operating within its borders not to enable spying on citizens, religious persecution and other human rights violations?