On Tuesday, Treasury Secretary Scott Bessent said the United States would examine China’s open source models for signs of intellectual property theft, threatening sanctions against Chinese AI companies if intellectual property theft is found.

“We’ve seen a lot of talk about open source models threatening the big language models in the United States,” Bessent said on Fox Business on Tuesday. “This administration supports open source models, but what we do not support is the theft of intellectual property. If we see, especially, that foreign models are stealing from our large companies, we have the ability to sanction them for this theft.”

Bessent’s comments were first reported by Bloomberg.

The statement comes as Chinese models (most recently Moonshot AI’s Kimi K3) are gaining in capabilities and popularity, threatening to damage the business models of leading American AI companies like OpenAI and Anthropic, as well as their ability to raise more capital to continue developing frontier models.

On Monday, Axios reported that the Trump administration is considering an outright ban on Chinese open source models, although others have disputed that claim.

AI companies have been warning 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 artificial intelligence companies to combat theft.

US sanctions against Chinese models would add to the growing list of strategies the government is trying to maintain its lead in the AI ​​race. After restricting China’s access to advanced chips and tightening export controls, Washington is now signaling that it could target AI models themselves, a move that could mark a significant escalation in technological competition between frontier labs and Chinese open source alternatives.

Model distillation is a technique that allows some of the capabilities of a larger model to be translated into a smaller system that is easier to run, but not everyone agrees that distilling another company’s model constitutes theft.

Earlier this month, Microsoft CEO Satya Nadella criticized big labs for making precisely this assumption: “While the great innovation that comes from model vendors having fair use rights to train models with public data is necessary, I find it ironic that the status quo is then to turn around and impose restrictive terms on distillation.”

AI lab training practices continue to be a source of legal risk for companies. This week, Anthropic got the green light to start cutting author checks as part of its $1.5 billion settlement after a judge ruled that it had illegally downloaded and stored millions of copyrighted books to train its artificial intelligence.

Additionally, some in the industry argue that distillation is not the only reason China is catching up with American AI companies.

“We know that distillation is a very small factor in the ability to create good models, and it’s a practice that everyone does, including companies in the US,” Hugging Face CEO Clem Delangue said on a recent episode of TechCrunch’s Equity podcast. “If it were easy to just do a distillation of being good at building AI models, there would be many other countries, including the US, with much better open source AI. The reality is that they have really good research teams in China… taking a much more open and collaborative approach to AI than in the US.”