> If the government thinks the terms of Anthropic are unacceptable, they can just stop using them, right

That is what they are doing.

> why would you then [....] ban other companies from making business with Anthropic if they want to be a defense contractor

Because, if it shops with Anthropic code, the DoD becomes subject to the restrictions when they receive the contractor's product. Anthropic's limitation is on the use, not (just) on the product or distribution.

To stop using them requires making the suppliers still using them as well.

That's just wrong. At most it requires the DoD to require that contractors do not use it on the work for the DoD.