US could sanction China over AI model theft, says Bessent

Treasury Secretary Scott Bessent has signaled that the US could impose sanctions on China over the theft of American AI models, marking a sharp escalation in the technology cold war between the world’s two largest economies.

What’s actually happening

Bessent has described China surpassing the US in artificial intelligence as the single biggest risk facing the country, prioritizing it above even AI safety concerns and job displacement.

White House OSTP Director Michael Kratsios issued a memo accusing entities in China of running “industrial-scale campaigns” to extract capabilities from US AI systems.

A bipartisan House bill has been introduced that would sanction foreign actors involved in extracting key features from closed-source US AI models.

Following a summit between Trump and Xi, the US and China announced plans to establish AI safety protocols specifically targeting non-state access to advanced models.

Why this is bigger than AI

Bessent’s framing reveals something important about how the current administration views economic competition. By elevating AI theft above traditional trade disputes, the Treasury is essentially creating a new category of economic warfare. Sanctions have traditionally targeted energy exports, financial systems, and military supply chains. Adding AI model theft to the sanctions toolkit expands the government’s reach into the technology sector in ways that could reshape investment flows for years.

For US tech companies building AI models, stricter regulations around intellectual property protection could mean higher compliance costs and more friction in international partnerships.

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