And since the US supposedly is pro-capitalism and free markets, wouldn't it make sense that someone in the US develops a superior consumer product and "defeats" the evil competitor products that way?
In a nutshell, what's happening here is that China is employing industrial policy strategically [1]. Drones are one example, but there are plenty of others like ship building, EVs, batteries, rare earths and many others [2].
The way this works is that industries are subsidized directly or indirectly to drive competition of the market and get to economies of scale. One sufficient scale is reached, it's very hard to for new companies to out-innovate incumbents (at least in capital intensive industries like manufacturing).
Now, to answer your question, protecting your domestic industry against unfair competition is giving local companies chance to innovate and establish domestic production - which in case of military conflict will play a decisive role [3] (noting that it doesn't have to be "domestic", but can be "friendshored" to allied countries, e.g. ship building in Korea and Japan).
[1] https://en.wikipedia.org/wiki/Industrial_policy
[2] https://foreignpolicy.com/2024/04/11/america-industrialpolic...
[3] https://www.noahpinion.blog/p/were-not-ready-for-the-big-one