* Chinese goods worth $200 bln face 25 pct tariff, up from 10 pct
* DowDuPont falls and weighs on the S&P after results
* Boeing, Caterpillar, chipmakers down roughly 1 pct
* Tesla jumps after cash burn worries abate
* Indexes down: Dow 0.52 pct, S&P 0.34 pct, Nasdaq 0.17 pct (Updates to open)
By Amy Caren Daniel
Aug 2 (Reuters) - U.S. stocks fell on Thursday, weighed down by financials, as worries of a trade war between the United States and China were heightened after President Donald Trump proposed 25 percent tariffs on $200 billion worth of Chinese imports.
U.S. Trade Representative Robert Lighthizer said Trump directed the increase from a previously proposed 10 percent duty because China has refused to meet Washington's demands and has imposed retaliatory tariffs on U.S. goods.
Beijing responded to the new threat saying it was ready to escalate the trade war.
Financials fell 0.6 percent, as JP Morgan and Bank of America dropped 0.6 percent each.
The Federal Reserve kept interest rates unchanged on Wednesday, but characterized the economy as strong, keeping the central bank on track to increase borrowing costs in September.
"Markets are substantially weaker as investors are spooked out by the latest development in the trade battle," said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
"Economic strength is evident and the jobs market is strong, but the trade war is creating turbulence for investors and trading is expected to be choppy, volatile and could easily change direction."
The technology sector dropped 0.18 percent. Microsoft fell 0.6 percent, the biggest drag on the sector.
The so-called FAANG group of stocks — Facebook, Apple , Amazon.com, Netflix and Google-parent Alphabet — dropped between 0.4 percent and 0.8 percent.
Chipmakers, whose major clients include Chinese companies, also declined, with Micron, Nvidia, AMD and Intel down between 0.5 percent and 1.2 percent.
Shares of trade-sensitive companies such as Caterpillar , Boeing and 3M fell more than 1 percent and weighed on the bluechip Dow Jones Industrial Average.
At 9:54 a.m. ET the Dow Jones Industrial Average was down 131.61 points, or 0.52 percent, at 25,202.21, the S&P 500 was down 9.43 points, or 0.34 percent, at 2,803.93 and the Nasdaq Composite was down 13.06 points, or 0.17 percent, at 7,694.22.
Eight of the 11 major S&P sectors were lower.
Tesla jumped 10 percent after the electric car maker convinced investors that it was able to produce positive cash flow and turn a profit.
DowDuPont's 2.8 percent drop, was the biggest drag on the S&P 500, after the chemical producer reported quarterly results.
Shares of TripAdvisor and Cognizant slipped 14.7 percent and 5 percent respectively, after their earnings failed to impress investors.
Declining issues outnumbered advancers for a 1.49-to-1 ratio on the NYSE and a 1.52-to-1 ratio on the Nasdaq.
The S&P index recorded five new 52-week highs and four new lows, while the Nasdaq recorded 43 new highs and 50 new lows. (Reporting by Amy Caren Daniel in Bengaluru; Editing by Shounak Dasgupta)