Treasury Secretary Scott Bessent announced on Tuesday that the United States would examine open source models from China for signs of intellectual property theft. He added that sanctions would be imposed against Chinese AI companies if such theft is confirmed.
“We’ve seen a lot of talk about open source models coming and threatening the large language models in the US,” Bessent said on Fox Business. “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.”
Bloomberg first reported the comments.
The statement arrives as Chinese models, most recently Moonshot AI’s Kimi K3, gain in capabilities and popularity. This trend threatens to harm the business models of top American AI firms like OpenAI and Anthropic. It also impacts their ability to raise capital for developing frontier models.
On Monday, Axios reported that the Trump administration is considering a wholesale ban on Chinese open source models. Other sources have disputed that claim.
AI companies have warned for months against campaigns by foreign actors to copy their AI technology and redeploy it as open source. In April, the White House said it would work closely with AI firms to combat the theft.
Sanctions from the U.S. against Chinese models add to the growing list of strategies the government is attempting to maintain the lead in the AI race. After restricting China’s access to advanced chips and tightening export controls, Washington is now signaling it may target the AI models themselves. This move could mark a significant escalation in the technological competition between frontier labs and Chinese open-source alternatives.
Model distillation is a technique that allows some of a larger model’s capabilities to be translated into a smaller system that’s easier to run. Not everyone agrees that distilling another company’s model constitutes theft.
Earlier this month, Microsoft CEO Satya Nadella criticized large labs for making just this assumption. “While the great innovation that comes from model providers having fair use rights to train models on public data is needed, I find it ironic that the status quo is to then turn around and impose restrictive terms on distillation,” Nadella said.
AI labs’ training practices continue to be a source of legal risk for the companies. Anthropic recently received approval to start cutting authors checks as part of its $1.5 billion settlement after a judge ruled it had illegally downloaded and stored millions of copyrighted books to train its AI.
Furthermore, some in the industry argue that distillation isn’t the only reason China is catching up to U.S. AI companies.
“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 U.S.,” Hugging Face CEO Clem Delangue said on a recent episode of TechCrunch’s Equity podcast. “If it were easy just to do distillation to get good at building AI models, there would be many other countries, including in the U.S., with much better open source AI. 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 U.S.”
What it means
For makers and creators, the threat of sanctions targets the tools they rely on rather than just the code. If Washington restricts access to specific Chinese models, developers may face sudden gaps in their workflow or be forced to switch to domestic alternatives. This creates uncertainty for projects built on open source foundations, as the line between legitimate research and sanctioned theft becomes a political decision.
