* Tech stocks dive as U.S. plans limits on Chinese investment
* Harley Davidson sees extra costs due to EU tariffs, shares drop
* Indexes down: Dow 1.8 pct, S&P 1.9 pct, Nasdaq 2.7 pct (Updates to late afternoon, changes byline, adds NEW YORK to dateline)
By April Joyner
NEW YORK, June 25 (Reuters) - An escalating trade dispute between the United States and other leading economies battered U.S. stocks on Monday, driving benchmark indexes lower by around 2 percent to their steepest losses in more than two months.
Losses were widespread but technology stocks suffered the most, with the Nasdaq diving 2.5 percent, as the U.S. Treasury Department was drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. tech firms, a government official said on Sunday.
U.S. Treasury Secretary Steven Mnuchin said on Monday in a message on Twitter that the restrictions would apply not specifically to China but "to all countries that are trying to steal our technology."
The S&P technology index dropped 3.0 percent, set for its biggest one-day plunge in nearly three months. The Philadelphia Semiconductor index dropped 3.7 percent as shares of chipmakers, which derive much of their revenue from China, took a hit.
Harley-Davidson Inc shares tumbled 7.1 percent after the company said it would move production of motorcycles shipped to the European Union to its international facilities. It forecast that tariffs would cost the company $90 million to $100 million a year.
"With the anecdotal evidence around Harley-Davidson, the concern is that what had been an escalation of rhetoric (on trade) is leading to real-world consequences," said Brian Nick, chief investment strategist at Nuveen in New York.
Investors raised concern that the escalating trade threats could lead to similar moves from other companies and dampen U.S. economic growth.
"There's only a couple of things that can derail a 3.5-, 4-percent growth economy. The combination of interest rates and trade wars are at the top of the list," said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York, referring to the U.S. Federal Reserve's decision earlier in June to rate interest rates.
The Dow Jones Industrial Average fell 460.2 points, or 1.87 percent, to 24,120.69, the S&P 500 lost 52.95 points, or 1.92 percent, to 2,701.93 and the Nasdaq Composite dropped 206.72 points, or 2.69 percent, to 7,486.10.
The CBOE Volatility index, known as Wall Street's fear gauge, spiked to its highest level in nearly a month.
The so-called FANG stocks, which have led momentum in U.S. stocks, were lower after having hit record intraday highs last week. Facebook Inc dropped 4.0 percent, Amazon.com Inc fell 3.9 percent, Netflix Inc slid 7.1 percent, and Alphabet Inc lost 3.8 percent.
Campbell Soup Co was the biggest percentage gainer on the S&P 500, rising 8.6 percent after a New York Post report that Kraft Heinz Co was considering buying the company.
Declining issues outnumbered advancing ones on the NYSE by a 3.49-to-1 ratio; on Nasdaq, a 3.68-to-1 ratio favored decliners.
The S&P 500 posted seven new 52-week highs and 18 new lows; the Nasdaq Composite recorded 60 new highs and 60 new lows. (Additional reporting by Sruthi Shankar in Bengaluru and Sinéad Carew in New York; Editing by Shounak Dasgupta)