Treasury Secretary Scott Bessent has indicated that the Trump administration is set to probe alleged intellectual property theft by Chinese artificial intelligence models—and sanctions could be on the table.
Bessent made it clear on Fox Business' "Mornings with Maria" on Tuesday that the U.S. government supports open-source models but not "IP theft." He cautioned that foreign models found guilty of stealing from American firms could be subjected to sanctions.
"What I will tell you is this administration supports open-source models, but what we do not support is IP theft," said the Treasury Secretary.
Bessent used the term "distillation" to describe this kind of theft, which refers to a method of AI training where a less competent model is developed using outputs from a more advanced model. He voiced concern over discovering "watermarks of our U.S. large language models on many of the Chinese models," deeming it unacceptable. Bessent confirmed that this issue would be addressed in the near future.
As per a Reuters report, the U.S. and China have planned to discuss AI-related issues in September, with Bessent representing the U.S.
This development comes amid growing tensions over AI between the U.S. and China. Chinese open-weight AI models are rapidly catching up to leading U.S. systems from OpenAI and Anthropic, raising concerns about America's long-term edge in artificial intelligence. Chinese startup Moonshot AI recently launched its Kimi K3 model, which outperformed several top U.S. models on certain industry benchmarks.
In June, Anthropic accused Alibaba Group Holdings Ltd. (BABA) and its AI research unit, Qwen, of running a large-scale AI "distillation" campaign to extract capabilities from its Claude models. In a letter to U.S. lawmakers, Anthropic alleged that operators linked to Alibaba used nearly 25,000 fraudulent accounts to generate over 28.8 million interactions with Claude. The company said the effort was intended to help China develop AI systems approaching the capabilities of Anthropic's advanced Mythos Preview models.
Meanwhile, Beijing regulators are reportedly considering stricter export controls on AI and semiconductor technologies. This includes potential restrictions on the transfer of crucial data for training their models overseas and limiting the downloading of their model weights by foreign users.
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