The Treasury secretary said the U.S. is finding watermarks of American large language models on Chinese AI systems
Treasury Secretary Scott Bessent (Buddhika Weerashinghe/Bloomberg via Getty Images).
Treasury Secretary Scott Bessent on Tuesday warned that the Trump administration could sanction Chinese artificial intelligence models if it finds they were built by stealing from American ones. "If we see, especially that overseas models are stealing from our great companies, we have the ability to sanction them because of this theft," Bessent told Fox Business on Tuesday.
Bessent identified the practice by its technical name — distillation — describing it as a method of AI training where the outputs of a large, powerful model are used to develop a smaller one. "We are finding watermarks of our U.S. large language models on many of the Chinese models, and that's unacceptable," he said. "We're going to be looking at that in the coming days or weeks."
The warning follows a letter Anthropic sent last month to the U.S. Senate Committee on Banking, Housing, and Urban Affairs in which the AI company alleged that Alibaba, the Chinese technology giant, had executed what it called "the largest known distillation attack" against it to date, according to CNBC.
Chinese open-weight AI models have been gaining ground against leading American offerings. Moonshot AI, a Chinese startup, released a model called Kimi K3 earlier this month that outperforms some American models across industry benchmarks, according to CNBC. Open-weight models release their final trained parameters for anyone to download, but the source code and data used to train them are not disclosed.
The threat of sanctions comes as the two countries are planning their first official AI dialogue under President Donald Trump, with talks expected in September before Chinese President Xi Jinping's planned U.S. visit on September 24. Bessent is set to lead the U.S. delegation during those discussions. The Trump-Xi summit in May produced an agreement to establish intergovernmental AI talks, with Bessent saying at the time that meetings could begin within four to eight weeks. China has said it is seeking technical engagement on AI issues rather than political talks.
Anthropic and OpenAI have each faced their own IP-related legal challenges. Anthropic reached a $1.5 billion settlement in September with a group of authors whose lawsuit accused the company of using books sourced from pirated databases without authorization. OpenAI and Microsoft $MSFT were sued by The New York Times in 2023 over claims that the two companies had trained their AI models on the publication's content without its consent.
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