US Treasury Secretary Scott Bessent says the Trump administration will look into whether Chinese AI models were distilled from US models and may “sanction them”
“When does it reach the threshold of a national security threat? We're going to have to act, but right now we're not there. We want competition. Competition first.”Ryan Fedasiuk /@ryanfedasiuk:This from @SecScottBessent is the right approach. We should be going after Chinese open-weight models because they present unique security risks and steal American IP—not necessarily because they are open-source or threaten the position of our leading labs.Gary Marcus /@garymarcus:translation: it's ok if o
CNBCAshley Capoot
Context & Ripple Effects
The inquiry follows reported efforts inside the administration to pursue de facto limits on foreign open-weight models as Chinese models gain traction. It shifts the policy rationale toward alleged model distillation and a stated national-security threshold rather than openness alone.
It also arrives while Bessent is associated with proposed US-China AI-security talks, creating a tension between using access restrictions as leverage and preserving a channel for risk discussions.
First-order effects
Chinese AI model providers face the prospect of a US investigation into whether their systems were distilled from US models, with sanctions presented as a possible—but not yet determined—outcome.
US Treasury and the wider administration must define what evidence and security threshold would justify action, while signaling that competition remains the current preference.
Second-order effects
A sanctions path would pressure US companies and platforms using Chinese models to review exposure and could accelerate demand for alternatives with clearer US market access.
The move reinforces the administration's parallel consideration of restrictions on AI-model exports to China, making model provenance and cross-border access more central compliance issues for leading labs and distributors.
Third-order effects
If investigations of model distillation become a recurring tool of policy, AI competition may increasingly be governed through provenance, access, and sanctions regimes rather than solely through export controls on chips or closed models.
The unresolved threshold leaves the eventual scope uncertain, but the pattern points toward AI models being treated as strategic assets in US-China economic policy.
The trend: AI model access and alleged model provenance are becoming instruments of geopolitical control alongside more established technology trade restrictions.
Bessent lays out the playbook: 1. Declare distillation to be theft. 2. Find that every foreign model has distilled a US model. 3. Sanction those companies and make it harder to use their models. This is a playbook for giving people outside the US, including malicious actors,
New: Undersecretary of War Emil Michael tells me Chinese openweight AI models don't currently need restrictions — “When does it reach the threshold of a national security threat? We're going to have to act, but right now we're not there. We want competition. Competition first.”
This from @SecScottBessent is the right approach. We should be going after Chinese open-weight models because they present unique security risks and steal American IP—not necessarily because they are open-source or threaten the position of our leading labs.
translation: it's ok if our companies steal IP wholesale from artists and writes, but bad if people from other countries steal IP wholesale for us. got it!
“It is going to fail miserably.” I concur. There is zero action DC can take that will stop or slow China's AI progress. In fact, DC action will very likely help them globally. Tyler is spot on.
If there has been “theft” that suggests a crime has been committed. But I am unaware of any lawsuits being filed. No company should be allowed to declare infringement without adjudication. I'm not convinced a court would call using a product as it's designed theft. There is a
@MikeIsaac the literal opposite is happening tons of investors have strongly advocated for pro open source position both in america and china https://x.com/... https://x.com/... https://x.com/... https://x.com/...
what will happen for the foreseeable future is basically most of the big labs and VC class lobbying the government against open source chinese models that is b/c open source erodes the first mover advantages closed source companies had and thats where all the investment is
Treasury Sec. Bessent on Fox: “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.”
U.S. AI policy for the foreseeable future is going to be an open sewer of bizarre, incoherent, xenophobic protectionism, and our trash press is going to normalize it as serious adult policymaking the entire way