The US has responded to stalled talks on the appreciation of the yuan with renewed threats of punitive trade sanctions that may result in a trade war with China, the Hong Kong Standard reported. Lawmakers say China undervalues the yuan, making US-bound exports cheaper and fueling the US trade deficit, which hit US$232.5 billion last year. US lawmakers want trade sanctions, including a possible 20% across-the-board tariff on mainland goods. Congress is currently drafting an anti-China trade bill that could disrupt bilateral trade and capital inflows from China. But the timing of the bill is worrisome. It comes at a time when US dependence on China trade has never been greater, warned Bank of America strategist Joseph Quinlan. Two-thirds of China's US$1.2 trillion in foreign currency reserves are reportedly in dollar-denominated assets, including US$420 billion in US Treasury bills. The US has already launched actions against China at the WTO but Vice Premier Wu Yi said China will "fight to the end" and will not tolerate sanctions.