This would be extremely heavy handed and probably end up accelerating the loss of the virtual US monopoly of payment network. The reast of the world isn't going to let the US dictate that only they get the frontier models whether their US made or otherwise
Can they actually though? Do they have legal authority to tell a payment processor that it has to block transactions of a legal US company, just because the company is hosting a Chinese-developed open source model? I’m sceptical
And what about companies (e.g. AWS) that let you “bring your own model”?
That's sanctioning specific individuals for specific acts they performed which the US claims contravene its interests and those of its allies.
I don't agree with the ICC sanctions, but it really can't be compared with the proposal "sanction any company, even US domestic entities, which use a Chinese-developed open source model".
In fact, I think part of what enables the US to sanction them (under US law) is the fact they are neither US citizens nor residents; if they were US citizens living in the United States, I don't think the President would have the legal authority to impose those kinds of sanctions.
They could sanction Hetzner–because it is a German firm based in Germany. I don't see how they could sanction a US firm based in the US whose owners and staff were US citizens.
Also, the 5th Circuit Court of Appeal decision Van Loon v Treasury (Nov 2024) is relevant–it held that IEEPA (the law used to sanction ICC officials) couldn't be used to sanction the Tornado Cash smart contract system, since open source code wasn't "foreign property" under IEEPA.
I agree, my only caveat is that the current administration has shown it's willing to go beyond aggressive regulatory interpretations to questionable and outright implausible interpretations. As we've seen recently, the federal courts and SCOTUS are overturning most of these but that can take a year or more to resolve. The one positive light is they seem to push the hardest on certain culture war issues (immigration, voting, districting, etc). AI doesn't seem like a core hot button issue for the White House and there is a strong pro-AI / business faction.