US-China tensions rise over AI models, trade rifts ahead of Xi-Trump summit

In the months leading up to President Xi Jinping’s planned September visit to Washington for a summit with US President Donald Trump, a series of smaller trade and technology rifts has emerged between the world’s two largest economies.

From tensions over Chinese artificial intelligence models and new US restrictions on advanced robotics, to optical modules and an expanded forced labour blacklist, this piece breaks down the latest developments shaping US-China economic ties.

1. AI models under scrutiny

The latest flashpoint in the US-China technology rivalry centred on Chinese AI models. In mid-July, Beijing-based start-up Moonshot AI unveiled Kimi K3, an open-weight large language model with 2.8 trillion parameters, which soon came under scrutiny in Washington.

Days later, White House Office of Science and Technology Policy director Michael Kratsios accused Moonshot of using model distillation to copy Anthropic’s Claude Fable model, while US Treasury Secretary Scott Bessent warned Chinese companies conducting “industrial-scale distillation attacks that cross the line into IP [intellectual property] theft” could face sanctions or be placed on the Entity List.

Beijing rejected the allegations, with China’s commerce ministry calling the accusations “a typical act of AI hegemonism” and vowing to “take all necessary measures” to safeguard its legitimate rights and interests.