* Tech stocks dive as U.S. plans limits on investment
* Harley-Davidson sees extra costs due to EU tariffs, shares drop
* Indexes down: Dow 1.3 pct, S&P 1.4 pct, Nasdaq 2.1 pct (Updates to close)
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, handing the S&P 500 and Nasdaq their steepest losses in more than two months.
The Dow Jones Industrial Average ended the session below its 200-day moving average for the first time since June 2016.
The S&P 500 tumbled as much as 2 percent early Monday on reports that 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.
U.S. Treasury Secretary Steven Mnuchin later said in a message on Twitter that restrictions would apply, not specifically to China, but "to all countries that are trying to steal our technology."
But Wall Street's major indexes only pared losses after White House trade adviser Peter Navarro indicated a softer stance on investment restrictions in a CNBC interview.
Investors said Navarro's comments were somewhat reassuring but still left uncertainty about trade relations.
"On the margin, it's helpful, but it shows conflicting signals from the administration, so the situation remains unsettling," said Jim Awad, senior managing director at Hartland & Co in New York.
Losses were widespread, but technology stocks suffered the most, with the tech-heavy Nasdaq diving 2.1 percent. The S&P technology index dropped 2.3 percent, its biggest one-day plunge in more than two months. The Philadelphia Semiconductor index dropped 3.1 percent as shares of chipmakers, which derive much of their revenue from China, took a hit.
Adding to investor concerns, Harley-Davidson Inc said it would move production of motorcycles shipped to the European Union to its international facilities. It forecast that EU tariffs would cost the company $90 million to $100 million a year. Harley-Davidson shares tumbled 6.0 percent.
The iconic motorcycle company's announcement raised concern that escalating trade threats could lead to similar moves from other companies and dampen U.S. economic growth.
"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.
The Dow Jones Industrial Average fell 328.09 points, or 1.33 percent, to 24,252.8, the S&P 500 lost 37.81 points, or 1.37 percent, to 2,717.07 and the Nasdaq Composite dropped 160.81 points, or 2.09 percent, to 7,532.01.
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 2.7 percent, Amazon.com Inc fell 3.1 percent, Netflix Inc slid 6.5 percent, and Alphabet Inc lost 2.6 percent.
Campbell Soup Co was the biggest percentage gainer on the S&P 500, rising 9.4 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 3.29-to-1 ratio; on Nasdaq, a 3.24-to-1 ratio favored decliners.
The S&P 500 posted eight new 52-week highs and 18 new lows; the Nasdaq Composite recorded 65 new highs and 65 new lows.
Volume on U.S. exchanges was 7.74 billion shares, compared to the 7.32 billion average for the full session over the last 20 trading days. (Additional reporting by Sruthi Shankar in Bengaluru and Sinéad Carew in New York; Editing by Shounak Dasgupta and Tom Brown)