US Treasury Secretary Scott Bessent said Washington could sanction Chinese AI companies if it finds evidence that they stole intellectual property from American model developers.

Speaking on Fox Business on Tuesday, Bessent said the Trump administration supports open source AI but would not tolerate foreign companies copying US technology.

“If we see, especially, that overseas models are stealing from our great companies, we have the ability to sanction them because of this theft,” he said.

The warning comes as Chinese models, including Moonshot AI’s Kimi K3, gain ground in coding, agentic tasks and other areas dominated by OpenAI and Anthropic.

Axios reported Monday that the Trump administration has considered broader restrictions on Chinese open source models, although the claim has been disputed.

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Sanctions would mark an escalation in Washington’s efforts to maintain its lead in AI. The US has already restricted China’s access to advanced chips and tightened export controls.

Targeting model developers directly would extend those measures to software and training practices.

The dispute centers partly on model distillation, a technique that transfers some capabilities from a larger model into a smaller system.

US AI companies have accused foreign developers of using their models to accelerate competing products. Critics argue that the industry is trying to classify a common development method as intellectual property theft.

Microsoft CEO Satya Nadella recently questioned that position, arguing that major AI companies rely on fair use to train models on public data while imposing restrictive terms on others attempting to distill their systems.

Hugging Face CEO Clem Delangue has also said distillation is only a small factor behind China’s progress. He attributed the country’s advances to strong research teams and a more open approach to AI development.

The debate comes as US AI companies face their own legal risks over training data. Anthropic recently received approval to begin payments under a $1.5 billion settlement with authors after a judge found that the company had illegally downloaded and stored copyrighted books.