Treasury Secretary Scott Bessent says the Trump administration is examining whether certain Chinese open-source or overseas-developed AI models were built using intellectual property taken from U.S. companies. In interviews and reporting on Tuesday, Bessent warned that the United States could impose sanctions if the review finds evidence of IP theft. He framed the issue as “unacceptable” and said U.S. officials are looking at whether Chinese AI systems rely on or reproduce capabilities from American large language models, including through processes such as model “distillation.” Multiple outlets report that Bessent referenced signs such as the presence of watermarks associated with U.S. models on Chinese AI systems, though the specific technical findings have not been detailed publicly. The comments are described as part of a broader U.S. effort to slow China’s AI progress by increasing scrutiny and potential enforcement. While sources agree that the administration is investigating and could act, they do not provide confirmed conclusions or the exact criteria that would trigger sanctions.