Fresh tensions emerged between the United States and China on Monday after Beijing warned it would respond if Washington imposed sanctions or trade restrictions on Chinese artificial intelligence companies over alleged theft of American technology. China also criticised new US tariffs on its exports, saying the measures reflected protectionism and could hurt efforts to stabilise trade ties between the world’s two largest economies.
The dispute came just months after both countries sought to ease trade tensions. While officials on both sides have kept communication channels open, disagreements over artificial intelligence, intellectual property and trade policies continue to test the relationship.
China’s Commerce Ministry accused the United States of trying to curb the growth of Chinese AI firms by making allegations without sufficient evidence. The ministry described Washington’s approach as “AI hegemonism” and warned that Beijing would act if Chinese companies or national interests suffered because of US actions, reported Reuters.
“For any action that causes substantive harm to Chinese interests, China will take all necessary measures to firmly safeguard its legitimate rights and interests,” a ministry spokesperson said.
What’s the dispute?
The latest disagreement centres on Moonshot AI, a Beijing-based company whose recently launched Kimi K3 artificial intelligence model has attracted attention for its coding abilities.
US officials claimed the company relied on large-scale model distillation, a method in which one AI model learns from another model’s outputs, to build its system. While the technique itself is common across the AI industry, US authorities said it crosses the line if developers use proprietary models without permission.
White House Office of Science and Technology Policy Director Michael Kratsios said the US government had information suggesting Moonshot used Anthropic’s Claude Fable 5 model during Kimi K3’s development, reported Reuters.
Kratsios alleged the company built an internal system to carry out large-scale distillation and changed its methods of accessing American AI models to avoid detection. He also claimed Moonshot acquired servers equipped with Nvidia’s GB300 chips and used computing resources in Thailand for AI training, reported Reuters.
US Treasury Secretary Scott Bessent later warned that Chinese companies accused of intellectual property theft could face financial sanctions or be added to the Commerce Department’s Entity List, which limits access to American semiconductors, software and cloud services.
“We support open-source AI and the innovation it unlocks. But open source is not open season on American IP,” Bessent wrote on X. “When PRC firms conduct covert, industrial-scale distillation attacks that cross the line into IP theft, sanctions and Entity List designations will be on the table,” he said.
Moonshot dismissed the allegations. The company told China’s National Business Daily that Kimi K3’s performance resulted from original improvements to its AI architecture rather than copying another company’s technology, reported Reuters.
Anthropic also said in February that it had identified more than 3.4 million interactions with its Claude models that it linked to Moonshot. According to the company, hundreds of fraudulent accounts targeted capabilities including reasoning, coding, computer vision and data analysis, according to Reuters report.
If the US places Moonshot on the Entity List, the company could face restrictions on buying advanced American chips, software and cloud services. The US previously used the same measure against Chinese telecom equipment maker Huawei.
Why is China objecting to new US tariffs?
Alongside the AI dispute, Beijing strongly criticised fresh US tariffs imposed on Chinese goods under an investigation into alleged forced labour. The United States announced tariffs of 10% and 12.5% on products imported from 60 trading partners, including China and the European Union, reported Reuters. Chinese goods received a 12.5% tariff under the new measures.
China’s Commerce Ministry rejected the decision and urged Washington to remove the duties. “This time, it has again initiated a Section 301 investigation and imposed unilateral tariffs on the grounds of ‘forced labour,’ which is a typical act of unilateralism and protectionism, and China firmly opposes it,” the ministry said.
The ministry also rejected allegations related to forced labour. “China has consistently opposed forced labour and has established a comprehensive system of labour laws and regulations to resolutely prevent and combat forced labour practices,” it said, as reported by Reuters.
At the same time, Beijing suggested that it remained willing to continue negotiations. The ministry said China hoped both countries would continue talks “based on mutual respect, equality and mutual benefit” and urged the United States to honour commitments made during earlier trade discussions by removing unilateral tariff measures.