The Trump administration has introduced a new stance on AI policy, accusing Chinese companies of technology theft while simultaneously defending open AI development. This distinction could form the basis for U.S. actions against Chinese AI firms without broadly restricting open-weight models. The administration specifically alleges that China's Moonshot utilized distillation to copy Anthropic's Fable model. Officials like Michael Kratsios clarify that while legitimate distillation for efficiency is vital, large-scale, covert industrial distillation for theft is unacceptable. Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer, and State Under Secretary Jacob Helberg echoed these concerns about intellectual property theft. OpenAI co-founder Greg Brockman stated it was too early to confirm if Chinese models were distilled from GPT systems and confirmed no involvement in discussions about banning Chinese open models. The administration is now effectively categorizing distillation into two types: authorized small-scale distillation as normal development, and industrial-scale, fraudulent distillation as theft. This policy shift appears partly in response to Moonshot's cheaper Kimi model, which has attracted some U.S. companies. Distillation is a common practice where smaller models learn from larger ones for efficiency and cost-effectiveness. The administration's comments indicate a desire to protect open AI development while taking a firm stance against China, with sanctions and Entity List designations as potential tools against IP theft.