The Trump administration has threatened to sanction Chinese artificial intelligence companies if investigations confirm that their open-source models have been built using stolen intellectual property from American AI developers, marking a potential new front in the ongoing technology war between the two countries.
Treasury Secretary Scott Bessent said on Fox Business, “We’ve seen a lot of talk about open source models coming and threatening the large language models in the US. This administration supports open source models, but what we do not support is IP theft. If we see, especially, that overseas models are stealing from our great companies, we have the ability to sanction them because of this theft.”
The statement comes as Chinese AI models, most recently Moonshot AI’s Kimi K3, have made rapid capability gains and attracted growing global users, threatening to undermine the commercial positions of leading American labs including OpenAI and Anthropic.
Reports also emerged this week that the administration is considering a wider ban on Chinese open-source AI models, though those claims were disputed by some observers.
The specific practice under scrutiny is model distillation, a technique that transfers some capabilities of a larger model into a smaller, more efficient system. AI companies have argued for months that foreign actors are using distillation to copy their technology. The White House said in April it would work with AI firms to combat the practice.
Not everyone accepts the framing. Hugging Face chief executive Clem Delangue said, “We know distillation to be a very small factor in the ability to create good models, and it’s a practice that everyone is doing, including companies in the US. The reality is they have really, really good research teams in China, taking a much more open and collaborative approach to AI than in the US.”
Microsoft chief executive Satya Nadella has also pushed back, saying it was “ironic” for AI companies that benefit from fair use training rights to then impose restrictive distillation terms on others.