And the point still stands. In practice USA is hurting itself more than hurting China with this. Specially if China gets a military advantage because of its local research, that now won’t be shared with USA.

And that's only looking at the governments themselves. When we look at the effect on both populations, it's even worse, as this sort of military paranoia is bound to slow down scientific development that would benefit both. Military often doesn't care about this, as it doesn't give a flying fuck to the interests of the population of its state, only the state itself.

Note that even the article itself raises those concerns:

Quotes from the article

The U.S. depends more heavily on China than China does on the U.S. in some strategic areas, according to an analysis by Clarivate of studies in respected journals shared exclusively with The Wall Street Journal.

Scientists interviewed by the Journal said they don’t tend to view their work in terms of national competition, but several said the possibility that their work could hurt the U.S. has been troubling. Many also expressed concerns that as their access to Chinese research diminished, they would lose insights into what Chinese researchers are doing.

In my opinion a better deal, even taking into account that military would happily kill their own mothers on their sleep if suspecting espionage, would be to renegotiate the deal. Shift the focus from specially risky fields to the ones that the military won't screech so much at.