* U.S. trade war will only make us stronger, China's top paper says
* White House delays decision on tariffs on imported cars
* MSCI world index dips, but pares steeper earlier losses
* Sterling weakens as Brexit talks collapse
* China's yuan hits weakest since November (Updates with opening of U.S. markets; changes dateline, previous LONDON)
By Lewis Krauskopf
NEW YORK, May 17 (Reuters) - A gauge of global stocks dipped but erased steeper losses in a volatile session on Friday while the Chinese yuan weakened as global trade tensions persisted to hover over financial markets.
Geopolitical concerns also spiked on news that talks regarding Britain's split with the European Union had faltered, putting pressure on the British pound.
MSCI's gauge of stocks across the globe shed 0.15%, but pared steep early losses.
In China, the Communist Party's People's Daily wrote in a front page commentary that the U.S. trade war will only make China stronger and will never bring the country to its knees.
It was the latest salvo in the trade conflict that has involved tit-for-tat tariffs on imports involving the world's two largest economies.
The White House confirmed that President Donald Trump is delaying a decision for as long as six months on whether to impose tariffs on imported cars and parts. Germany's economy minister said the move offers hope that a renewed escalation of the trade conflict with the European Union could be prevented for now.
Separately, according to media reports, the United States is close to a deal to remove tariffs on steel and aluminum imports from Canada and Mexico, which could help the three countries' trade pact get ratified in the U.S. Congress.
"What’s driving the market on a day-to-day basis is the 24-hour news cycle of headlines primarily around U.S.-China trade relations," said Walter Todd, chief investment officer at Greenwood Capital Associates in Greenwood, South Carolina.
Wall Street's main indexes erased initial losses to trade higher.
The Dow Jones Industrial Average rose 45.33 points, or 0.18%, to 25,908.01, the S&P 500 gained 2.71 points, or 0.09%, to 2,879.03 and the Nasdaq Composite dropped 9.10 points, or 0.12%, to 7,888.95.
Shares of Deere & Co fell 5.0% after the agriculture equipment maker cut its full-year outlook, as the trade war threatens to hit farm incomes further.
The pan-European STOXX 600 index lost 0.34%.
In currencies, the Chinese yuan fell as far as 6.949 against the dollar on Friday, its weakest level since Nov. 30.
The dollar index, which measures the greenback against a basket of currencies, rose 0.12%, with the euro down 0.12% to $1.1159.
Sterling hit a four-month low after cross-party Brexit talks collapsed and concern grew about the impact Prime Minister Theresa May's likely resignation would have on Britain's exit from the European Union.
German bond yields fell back toward 2-1/2 year lows following the escalating trade tensions and collapse of Brexit talks.
U.S. Treasury yields fell as traders sought safe-haven assets.
Benchmark U.S. 10-year notes last rose 2/32 in price to yield 2.3997%, from 2.405% late on Thursday.
U.S. crude rose 0.43% to $63.14 per barrel and Brent was last at $72.42, down 0.28% on the day.
Additional reporting by Marc Jones in London; Editing by John Stonestreet, Gareth Jones and Dan Grebler