As Chinese companies like TikTok gain access to U.S. markets and ever more data on American citizens, many observers have argued that federal privacy legislation has become a national-security imperative. Yet concerns about China and national security are only two of several reasons for the United States to enact such legislation. When it comes to strengthening privacy, digital trade, and U.S. national security, it’s important to recognize what privacy legislation would and would not accomplish on its own—and why additional steps are needed.

A federal privacy law would provide consumers...