Yes it is worse for America's image that a competitor censors another competitor. It puts a bad light on the US Government itself that it cannot regulate private companies and are at the mercy of private companies that even Government communications can be censored. This is far beyond what free speech is all about.
And don't tell me US Government hasn't banned private companies. Huawei ban immediately comes to mind. So many companies have been banned for nefarious activities including but not limited to fraud and scams. It is 100 percent in the purview of US Congress to ban for any violations of law. Free speech has nothing to do with powers the US Government enjoys vis-a-vis legal entities like a company or trust. A company is not an individual. A company is not a Citizen of the United States. A company doesn't enjoy free speech rights. It is a legal entity that was allowed to function because of the US Government. Not because Apple, Facebook, Twitter or Google decided to. Only the US Government can cancel trade licenses, company registration and debar individuals from ever holding directorship. That power is not vested in the hands of few silicon valley companies.