* China unveils retaliatory tariffs on $75 bln worth of U.S. goods
* Trump to raise existing tariffs on Chinese goods to 30% on Oct 1
* U.S.-Japan trade talks progress, U.S. auto concessions unlikely
By Tomo Uetake
TOKYO, Aug 26 (Reuters) - Japanese shares shed more than 2% on Monday, with China-related firms leading the losses after a fresh escalation in the Sino-U.S. trade war knocked global equities markets.
The Nikkei share average fell as much as 2.6% to 20,173.76, its lowest level since Aug. 6, before closing at 20,261.04, 2.2% lower on the day.
"Developments over the weekend have taken the U.S.-China trade war to a whole different level. No one can be naive enough to think this will end anytime soon," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley (MUMSS).
China on Friday said it would impose tariffs on about $75 billion in imports from the United States including some agricultural products, crude oil and small aircraft.
Hours later, U.S. President Donald Trump heaped an additional 5% duty on some $550 billion in targeted Chinese goods in the latest tit-for-tat escalation between the world's largest economies.
This sent stocks, the dollar and oil prices sharply lower on Friday, with all three Wall Street major indexes shedding between 2.4% and 3% on Friday, while safe-havens were in demand.
The broader Topix shed 1.6% to 1,478.03, with all of Tokyo's 33 subindexes falling. It wiped out all its gains for the year and down 1.1% year-to-date.
Machinery and chip-equipment makers were especially hit hard as the new round tariffs triggered profit-taking in companies which rely on China demand.
Yaskawa Electric dived 6.1% and Fanuc Corp tumbled 3.6%, while Tokyo Electron, TDK Corp and Screen Holdings slid 3.0%, 3.1% and 3.2%, respectively.
"One wonders how long these trade tariffs on both sides can keep going up and up before they start making the economy and stock market go down and down," said Chris Rupkey, chief financial economist at MUFG Union Bank. "Investors have had enough and want out."
Automakers and exporters were broadly lower after the yen gained to 104.46 yen against the dollar, a level not seen since Jan. 3. Subaru Corp lost 2.1% and Mazda Motor declined 2.2% and, while Omron Corp shed 3.8%.
A strong yen reduces corporate profits when they are repatriated. The yen last stood at 105.29 yen to the dollar.
President Trump and Japanese Prime Minister Shinzo Abe said late Sunday that the United States and Japan agreed in principle to core elements of a trade deal they hoped to sign in New York next month.
U.S. Trade Representative Robert Lighthizer said the deal covered agriculture, industrial tariffs and digital trade, and that auto tariffs would remain unchanged.
"The market is asking Prime Minister Abe if he really wants to hike Japan's sales tax in October in this situation," said MUMSS's Fujito. "If he does, that could weaken an already fragile economy and corporate earnings even further." (Reporting by Tomo Uetake; Editing by Sam Holmes)