Michael Kratsios, President Trump’s chief science and technology adviser, sent a memo to federal agency heads on Thursday accusing entities “principally based in China” of running deliberate, industrial-scale campaigns to extract capabilities from leading American AI models.
Why it matters: The memo marks the administration’s most specific public accusation against Chinese AI firms and sets the stage for potential sanctions ahead of a Trump-Xi summit expected within weeks.
What distillation means
The technique, known as distillation, involves querying proprietary AI models millions of times through their application programming interfaces (APIs) to build training datasets that replicate how the larger systems behave. The result is smaller, cheaper models that approximate the performance of the originals.
According to the memo, foreign actors use proxy accounts to evade detection, jailbreak models to expose proprietary information, and deliberately strip security protocols from the resulting systems.
Who is named
OpenAI and Anthropic have both said this year that China-based firms — including DeepSeek, Moonshot AI, and MiniMax — were behind wide-scale distillation attacks on their models. The Kratsios memo does not name individual companies but accuses actors “principally based in China” of the campaigns.
What comes next
The administration said it will work with American AI companies to identify distillation activity, build technical defences, and find ways to punish offenders. The House Foreign Affairs Committee has offered unanimous, bipartisan support for a bill that would establish a process to identify foreign actors extracting key technical features from closed-source, US-owned AI models and authorise sanctions against them.
The memo lands weeks ahead of a planned Trump-Xi summit, adding AI intellectual property to an already tense bilateral agenda that includes tariffs, Taiwan, and Iran.