(Adds close of U.S. markets; oil, gold settlement prices)
* Trump imposes 10 pct tariffs on $200 bln goods from China
* China says will retaliate, but markets shrug
* Dollar flat in FX markets, government bonds make ground
* Oil rises 1 pct on signs OPEC not prepared to boost output
By Herbert Lash
NEW YORK, Sept 18 (Reuters) - Global equity markets rallied on Tuesday as the latest tit-for-tat U.S.-Chinese trade dispute was seen as barely denting world growth, while U.S. Treasury yields rose in anticipation the Federal Reserve will hike interest rates this year and next.
China said it will levy tariffs on about $60 billion worth of U.S. goods, as previously planned, but cut the level of tariffs it will collect. U.S. President Donald Trump on Monday said 10 percent tariffs on $200 billion of Chinese products will start next week and reach 25 percent by year-end.
MSCI's gauge of stocks across the globe gained 0.48 percent. Chinese shares initially slid as investors in Asia digested the details of China's response but then rallied to push the blue-chip CSI index up 2 percent.
China has limited retaliatory levers it can pull on the tariff front, said Anthony Saglimbene, global market strategist at Ameriprise Financial Services in Troy, Michigan.
Any escalation is likely to involve its currency or making it harder for U.S. companies to operate in China, but the immediate dent on the economic picture is likely to be small, he said.
"We anticipate this last round of tariffs, the $200 billion, it's only probably going to add 0.2 percentage points to consumer prices. That's nothing," Saglimbene said.
"The market is smart and it's sniffing out through the end of the year the tariff impact is likely to be small on economic growth and it's small on corporate profits," he added.
The United States took 300 consumer products off its original list of products to receive tariff hikes, which will blunt the impact on the consumer, Saglimbene said.
Dutch bank ING estimated that 2.5 percent of world trade was now affected by the tariffs and it will be 4 percent if Trump carries out threats to put levies on all Chinese imports.
In Europe, the pan-regional FTSEurofirst 300 index of leading shares closed up 0.15 percent. Wall Street rallied.
The Dow Jones Industrial Average rose 184.84 points, or 0.71 percent, to 26,246.96. The S&P 500 gained 15.51 points, or 0.54 percent, to 2,904.31 and the Nasdaq Composite added 60.32 points, or 0.76 percent, to 7,956.11.
MSCI's 24-country emerging market index was up for the fourth day in the last five.
Despite all the noise, the widely tracked dollar currency index rose 0.14 percent, with the euro slid 0.16 percent to $1.1664.
The Japanese yen weakened 0.43 percent versus the greenback at 112.31 per dollar.
U.S. benchmark 10-year and 30-year yields both climbed to fresh four-month peaks as investors continued to price in more interest rate increases by the Fed this year and next.
Benchmark 10-year notes fell 13/32 in price to lift its yield to 3.0514 percent.
In Europe, Italian government bond yields fell sharply on growing optimism that Italy's new coalition budget will respect European Union rules on fiscal discipline.
Two- and five-year yields fell as much as 15 basis points to their lowest levels since July, while yields on short-dated top-rated German debt rose to four-month highs.
Oil rose almost $1 a barrel on signs the Organization of the Petroleum Exporting Countries would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signaled it was in no rush to bring prices down.
U.S. crude rose 94 cents to settle at $69.85 per barrel and Brent settled up 98 cents at $79.03 per barrel.
U.S. gold futures $2.90 to settle at $1,202.90 an ounce.
Reporting by Herbert Lash Editing by Nick Zieminski and Lisa Shumaker