* Trump's new threat follows Friday's tit-for-tat tariffs
* 24 of Dow 30 down; seven of 11 S&P sectors slip
* Boeing, Caterpillar lead Dow lower
* Indexes down: Dow 1.36 pct, S&P 0.74 pct, Nasdaq 9.7 pct (Changes comment, adds details, updates prices)
By Medha Singh
June 19 (Reuters) - U.S. stocks slumped and the Dow Jones Industrial Average erased its gains for the year on Tuesday, as a sharp escalation in U.S.-China trade dispute jolted the markets and triggered a rush to safer assets.
President Donald Trump, in an unexpectedly swift and sharp move, threatened to impose a 10 percent tariff on $200 billion of Chinese goods and Beijing warned it would retaliate.
Trump said his move followed China's decision to raise tariffs on $50 billion in U.S. goods, which came after U.S. announced similar tariffs on Chinese goods on Friday.
"This is an unexpected move and clearly an escalation in both trade war rhetoric, and downside risk," said Chris Payne, managing director at GWM Investment Management.
"China will soon run out of U.S. goods on which to impose retaliatory tariffs which will move this negotiation to a more sensible and constructive forum."
At 11:01 a.m. EDT the Dow Jones Industrial Average was down 339.21 points, or 1.36 percent, at 24,648.26. The S&P 500 was down 20.53 points, or 0.74 percent, at 2,753.22 and the Nasdaq Composite was down 75.37 points, or 0.97 percent, at 7,671.66.
The benchmark S&P 500 touched its lowest level in over two weeks, while the Dow fell below its 50-day and 100-day moving averages, considered key technical indicators of short- and near-term momentum.
The sell-off was broad, with 24 of the 30 Dow components in the red and seven of the 11 major S&P sectors lower.
Volatility returned with a bang. The CBOE Volatility Index , commonly known as Wall Street's fear gauge as it measures expected near-term volatility in the S&P 500, hit a near three-week high of 14.68 points, before easing to 14.04.
Shares of Boeing, which has acted as a proxy for trade war tensions with China as it is the single largest U.S. exporter to the country, fell 3.2 percent, weighing the most on the Dow. Construction equipment maker Caterpillar closely followed and was down 3.3 percent.
The declines weighed on the S&P industrials index, which fell 1.94 percent, the biggest one-day percentage drop in nearly two months.
Demand for safe havens saw yield on the 10-year benchmark U.S. Treasury drop to its lowest in more than two weeks.
Financials index declined 0.43 percent as big banks weighed. Banks often track yields as higher interest rates can help boost their profits.
Chipmakers, which depend on China for a large portion of their revenue, also slipped, with Intel down 1.6 percent.
The small-cap Russell 2000 index, whose components are relatively more insulated to a global trade war, was down 0.76 percent - in line with the S&P 500.
Tariff worries dragged FedEx Corp down 2.2 percent and weighed heavily on the Dow Jones Transport index. The package delivery company is expected to issue quarterly report after the bell.
U.S.-listed shares of Chinese companies tumbled, with e-commerce giant Alibaba down 3.3 percent and JD.com off 5.7 percent.
Declining issues outnumbered advancers for a 2.61-to-1 ratio on the NYSE and for a 2.37-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and four new lows, while the Nasdaq recorded 58 new highs and 32 new lows. (Reporting by Medha Singh in Bengaluru; Editing by Sriraj Kalluvila)