That cat is out of the bag, don't you think? Even if the US passes a strict law protecting copyright owners from having their works used to train AI, China is not going to obey that law, so US companies will just fall behind.
Separate from the morality of the issue (which is clearly that you can't take things you didn't pay for), if such a law is passed, then either the US will actually develop a model that allows AI companies to properly buy training data from people, or China will excel in AI specifically, which doesn't guarantee much of anything at this point. If and when AI turns out to have meaningful geopolitical implications, then the US will revisit that situation, if needed (which is unlikely - companies will push for there to be a way for them to buy data).
The cat is out of the bag in terms of people passing around models that are “illegal” in your scenario, though such models would disappear from places like Huggingface. Running a commercial service that touches one of those models is off the table and will be blocked, at the IP level if need be, in essentially all the countries that matter economically to Chinese “exporters”.
Saying "I refuse to acknowledge the reality of the situation and will just continue saying that we need to do the 'right' thing" like it's a bad thing is also implying that morals don't matter.
People who don't have morals don't belong in society.
So when you, and other's, stroll up and say "but but if we do this then AI companies won't be able to make money!!1! And also China!" that doesn't mean anything. Because then the response is, "well yeah, illegal actions shouldn't make you money."