The Trump administration has made its position on artificial intelligence clear. AI is a race, China is the only other runner, and cooperation is off the table.
The awkward part is that many American companies are quietly buying from the competition. Inexpensive Chinese-made AI tools are reportedly winning business that might otherwise go to Silicon Valley.
A two-horse race, by presidential decree
Ahead of his September 2026 meeting with Chinese President Xi Jinping, President Trump cast AI development as a zero-sum contest between Washington and Beijing.
“Whoever wins AI, wins,” Trump said.
He went further, describing the field as strictly a US-China affair with no country holding third place.
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The summit did produce something. Between September 23 and 25, 2026, the two countries set up an AI dialogue along with channels for communicating about incidents.
Trump made clear he still rejects deeper cooperation, voicing concern that working together on AI development could lead to sensitive information slipping away.
That concern isn’t abstract for US officials. They have accused Chinese firms such as DeepSeek of large-scale model distillation, a practice the officials say copies American AI capabilities, potentially with government endorsement.
Distillation, for the uninitiated, works a bit like a student who learns by studying the answers a star pupil gives. A smaller model is trained on the outputs of a larger, more capable one, absorbing much of its skill without the original’s development costs.
The cost problem Washington can’t wave away
Reports in 2026 indicate that some US firms save 60-90% by switching to low-cost Chinese AI models.
These Chinese alternatives reportedly account for a notable share of AI workloads in major enterprise environments in 2026.
The shift is happening against a backdrop of strict US export controls on semiconductors and AI technologies. Ongoing cases involve smuggling operations moving Nvidia AI chips and servers into China, with reported losses exceeding $2.5 billion.
So the picture runs in both directions. Advanced American hardware is allegedly flowing into China through back channels, while cheap Chinese software flows into American companies through the front door.
Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.