U.S. Treasury Secretary Bessent Says Trump Admin Could Sanction China Over AI Model Distillation

According to CNBC, on Tuesday, U.S. Treasury Secretary Scott Bessent said the Trump administration could impose sanctions on China over alleged artificial intelligence model distillation, where smaller models are built using outputs from stronger U.S. models. "If we see that overseas models are stealing from our great companies, we have the ability to sanction them because of this theft," Bessent told Fox Business. He noted that watermarks from U.S. large language models have been found on many Chinese models, citing this as unacceptable.

The statement follows concerns from tech executives and government officials about Chinese AI startups gaining ground against American companies like OpenAI and Anthropic. Anthropic previously alleged that Chinese tech company Alibaba conducted "the largest known distillation attack" against it. The U.S. and China are planning to hold AI-focused talks in September, with Bessent set to represent the U.S., according to Reuters.