The particular industry that’s being nationalised is American flags produced for US government consumption. (The nationalisation part)
They’ve decided to legislate because they don’t like the optics of some foreign made products. (This isn’t an invisible hand; it’s opaque)
How is that justified in a supposedly capitalist society when China can produce flags of the same quality but at a cheaper price?
Edit: maybe protectionism is a better word than nationalise, end effect is the same; The government of a capitalist country is directly interfering with the market.