U.S.

Treasury Secretary Scott Bessent said on Tuesday that the Trump administration would examine open source AI models from China for signs of intellectual property theft, threatening sanctions against Chinese AI companies if IP theft is established.

Speaking on Fox Business, Bessent stated that the administration supports open source models but not IP theft, and that the U.S.

has the ability to sanction overseas models that steal from American companies.

The comments, first reported by Bloomberg, come as Chinese models such as Moonshot AI‘s Kimi K3 are gaining capabilities and popularity, threatening the business models of top U.S.

AI firms like OpenAI and Anthropic, as well as their ability to raise capital.

Earlier in the week, Axios reported that the Trump administration is considering a wholesale ban on Chinese open source models, though others have disputed that claim.

AI companies have been warning for months about foreign actors copying their AI technology and redeploying it as open source.

In April, the White House said it would work closely with AI firms to combat theft.

Sanctions against Chinese models would mark an escalation in the technological competition after restrictions on chip exports.

Model distillation—a technique that transfers capabilities from a larger model to a smaller one—is central to the debate, but not everyone considers it theft.

Microsoft CEO Satya Nadella criticized large labs for imposing restrictive terms on distillation while benefiting from fair use training on public data. Meanwhile, U.S.

AI labs face their own legal risks: Anthropic this week got court approval to begin paying authors as part of a $1.5 billion settlement over illegally downloaded copyrighted books used for training.

Hugging Face CEO Clem Delangue argued that distillation is a small factor in China’s progress and that Chinese teams have strong research and take a more open, collaborative approach than in the U.S.