US to Crack Down on Chinese Firms ‘Exploiting’ American AI Technology

Trump Administration Vows to Counter AI Exploitation by Foreign Tech Companies, Focusing on China

WASHINGTON (AP) — The Trump administration is taking steps to protect U.S. artificial intelligence (AI) technology from what it describes as exploitation by foreign companies, with a particular focus on China as it rapidly closes the gap in AI capabilities.

In a memo released Thursday, Michael Kratsios, the president’s chief science and technology adviser, accused entities “principally based in China” of conducting large-scale efforts to extract capabilities from leading U.S.-made AI systems. This practice, known as “distillation,” is seen as exploiting American innovation and expertise.

The administration plans to collaborate with American AI companies to identify these activities, develop protective measures, and implement penalties for those involved.

This move comes as China increasingly challenges U.S. dominance in the field of artificial intelligence – a sector the White House deems crucial for maintaining global leadership and securing economic and military advantages. However, a recent report from Stanford University’s Institute for Human-Centered AI indicates that the performance gap between U.S. and Chinese AI models has “effectively closed.”

China’s embassy in Washington responded by opposing “the unjustified suppression of Chinese companies by the U.S.” and reaffirming its commitment to scientific and technological progress through cooperation and intellectual property protection, as stated by embassy spokesperson Liu Pengyu.

China’s Foreign Ministry spokesperson Guo Jiakun echoed this sentiment, dismissing the U.S. claims as baseless and a smear campaign against China’s AI industry. He urged the U.S. to respect facts, abandon prejudice, and foster scientific and technological exchange between the two nations.

The administration’s concerns are also being addressed on Capitol Hill. The House Foreign Affairs Committee has unanimously supported a bill that would establish a process for identifying foreign actors who extract key technical features from U.S.-owned, closed-source AI models and impose sanctions as punishment.

“Model extraction attacks are the latest frontier of Chinese economic coercion and theft of U.S. intellectual property,” said Rep. Bill Huizenga (R-Mich.), the bill’s sponsor. “American AI models are demonstrating transformative cyber capabilities, and it is critical we prevent China from stealing these technological advancements.”

Last year, the emergence of DeepSeek, a Chinese startup offering a large language model competitive with U.S. giants at a lower cost, raised concerns. David Sacks, a former AI and crypto advisor to President Trump, suggested DeepSeek had copied U.S. models. OpenAI, the creator of ChatGPT, made similar allegations in a February letter to lawmakers, arguing that China should not be allowed to advance “autocratic AI” by “appropriating and repackaging American innovation.”

Anthropic, the company behind the Claude chatbot, also accused DeepSeek and two other Chinese AI labs of using distillation techniques to illicitly acquire Claude’s capabilities. While distillation can be a legitimate training method, Anthropic argues it becomes problematic when used to quickly and cheaply replicate the capabilities of independently developed models.

However, the flow of technology isn’t one-way. Anysphere, a San Francisco-based startup, recently acknowledged that its latest product is based on an open-source model developed by Chinese company Moonshot AI.

Kyle Chan, a fellow at The Brookings Institution specializing in China’s technology development, acknowledges the difficulty in distinguishing between legitimate data requests and unauthorized distillation. He suggests increased information sharing and coordination among U.S. AI labs, with the federal government playing a facilitating role.

The future of the House bill remains uncertain, and Chan notes that President Trump may be hesitant to escalate tensions with Chinese President Xi Jinping ahead of a planned state visit to Beijing in mid-May.