* U.S. likely to announce tariffs on $200 bln in Chinese goods
* European shares down after falls in Asia
* Dollar slips but currency markets quiet
* Oil rebounds on supply concerns
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh (Updates throughout)
By Tommy Wilkes
LONDON, Sept 17 (Reuters) - Stock markets headed south on Monday as investors took fright at news that Washington was set to announce a new round of tariffs on Chinese goods in the latest escalation of their trade conflict.
U.S. President Donald Trump's expected announcement of new tariffs on $200 billion in Chinese goods drew an immediate threat of reprisals from Beijing.
Trump took to Twitter early on Monday to say: "If countries will not make fair deals with us, they will be "Tariffed!"
The growing trade conflict between the world's two largest economies has long unnerved investors who fear an escalation could eventually whack global growth, while talks between the two countries have failed to make much headway.
The pan-European STOXX 600 index fell as much as 0.2 percent, while Germany's DAX, home to large exporters and carmakers, dropped half a percent. France's CAC 40 and Britain's FTSE 100 each fell 0.3 percent.
Last week, Europe's STOXX 600 had enjoyed its best weekly gain since July as the Turkish central bank's interest rate rise brought a broad relief rally, but the mood was less buoyant on Monday.
The falls in Europe followed weakness across Asian markets. MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.2 percent, snapping three straight sessions of gains.
The MSCI world equity index, which tracks shares in 47 countries, remains more than 5 percent off its record high touched in January, and down 0.8 percent in September.
"On the Chinese side, Mr. Trump has burned a lot of political capital so it's hard to see how talks can resume if Mr. Trump goes ahead on the $200 billion," Freya Beamish, chief Asia economist at Pantheon Macroeconomics, told the Reuters Global Markets Forum.
"China's scope to retaliate is surprisingly limited, however, especially since the outbreak of swine flu, which will anyway push up CPI inflation," Beamish said, referring to the deadly swine fever strain that is seen impacting Chinese pork prices.
The S&P 500 e-minis fell 0.1 percent, indicating Wall Street would open slightly weaker.
Beamish doubted whether the United States would slap 25 percent tariffs on $200 billion of Chinese imports, as the Trump administration has said it is considering, and the Wall Street Journal reported the tariff level would probably be about 10 percent.
Market watchers reckon further escalation is likely, although some investors think Trump's tariff threats are largely rhetoric aimed at a domestic audience before the mid-term elections in November. They expect tensions to ease once the vote is out of the way.
"I think the market has digested more or less all this rollercoaster with tariffs and I think [Trump is] trying to finish off with this matter until November," said Dimitrios Stefanopoulos, portfolio manager at Alpha Trust in Greece.
The dollar fell on Monday, suggesting investor nervousness was limited. The greenback tends to firm during bouts of trade tension as investors seek safety in the world's most liquid currency.
The greenback index slipped 0.2 percent at 94.725, having bounced from a low of 94.359 at the end of last week as Treasury yields rose.
The euro added 0.3 percent to $1.1659 and the yen strengthened 0.1 percent to below 111, with broader foreign exchange moves limited.
Emerging market currencies were mostly weaker after a strong run last week following the Turkish central bank's decision to sharply raise interest rates to shore up confidence in the lira.
The lira fell more than one percent to 6.2340 while Russia's rouble dropped 0.2 percent to 68.17 as the effect of a Russian central bank rate hike on Friday faded.
European government bond markets were quiet and yields mostly flat, but Italian yields fell 6-8 basis points amid growing hopes that Italian ministers, who meet later on Monday, will agree a market-friendly 2019 budget.
Oil prices rebounded from earlier losses despite assurances from Washington that Saudi Arabia, Russia and the United States can raise output fast enough to offset falling supplies from Iran and elsewhere.
Brent crude oil rose 0.78 percent to $78.70 a barrel. U.S. light crude was up 0.75 percent at $69.51.
Gold traded 0.28 percent higher at $1,197.51 an ounce , but was still some way from last week's top at $1,212.65. (Additional reporting by Helen Reid in LONDON, Divya Chowdhury in MUMBAI and Wayne Cole in SYDNEY Reporting by Tommy Reggiori Wilkes Editing by Janet Lawrence and Gareth Jones)