President Donald Trump ordered every federal agency to cut ties with Anthropic on Friday, and Defense Secretary Pete Hegseth followed by designating the company a supply chain risk to national security — a label previously reserved for foreign adversaries, applied to an American company for the first time. The move capped a weeklong public standoff over two AI guardrails the administration said it could not accept. By the end of the night, it became clear it could.
Trump moved about an hour before the Pentagon’s own 5:01 PM deadline, posting on Truth Social that Anthropic had made a “disastrous mistake” by trying to “strong-arm the Department of War.”
Hegseth followed shortly after the deadline passed, calling Anthropic’s stance “fundamentally incompatible with American principles” and giving agencies six months to phase out the technology.
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The supply chain risk label bars any contractor, supplier, or partner doing business with the US military from conducting commercial activity with Anthropic — a cascade that threatens to reach well beyond the $200 million Pentagon contract at issue.
That designation has no precedent in domestic use. The supply chain risk framework was built for foreign threats — companies like Huawei deemed instruments of adversarial governments.
Fortune reported that legal experts called this the first time it has been applied to an American company, and the first time it has functioned as apparent punishment for refusing contract terms. Statute also requires the Pentagon to have exhausted less intrusive alternatives first, a standard experts said the single-week confrontation made difficult to satisfy.
Anthropic said Friday it had not yet received direct communication from either Trump or Hegseth, announced it would challenge the designation in court, and disputed Hegseth’s claim that the blacklist extends to contractors’ broader commercial activity — arguing federal law confines the designation to Pentagon contracts specifically.
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Read: Anthropic CEO Says Pentagon Threats ‘Do Not Change Our Position’ as Deadline Looms
Hours after the blacklisting, OpenAI CEO Sam Altman announced that his company had reached a deal with the Pentagon to deploy its models on classified networks — with prohibitions on domestic mass surveillance and autonomous weapons built into the agreement. Those are the same two restrictions the administration had spent a week insisting it could not accept from Anthropic.
It remains unclear whether the contract language differs in any substantive way from what Anthropic had proposed.
What made that harder to explain was a detail Axios reported: at the moment Hegseth was posting the designation on X, Pentagon undersecretary Emil Michael was on the phone offering Anthropic a last-minute deal — one that would have required the company to allow collection of personal data on Americans, including location data, browsing records, and financial information sourced from data brokers. Anthropic declined.
Beyond the legal exposure, the Pentagon created an operational problem for itself. Defense officials told Axios it would be a significant undertaking to extract Claude from existing systems — it was used in the January operation that captured Venezuelan President Nicolás Maduro and remains deeply embedded through the Palantir integration, with Grok the only other AI cleared for classified networks and not considered a comparable replacement.
The political fallout was equally swift: Sen. Mark Warner said the actions risked steering contracts to a preferred vendor, a reference to Musk’s xAI, which accepted the Pentagon’s terms without objection last week, while hundreds of employees at Google and OpenAI signed petitions urging their companies to hold Anthropic’s same lines.
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