* Trump's tariff on steel and aluminium raises trade warfears
* U.S. debt yields fall as trade worries dwarf inflationjitters
* Yen jumps after Kuroda says mulls exit if inflation targetmet
* European shares fall over 1.5 pct, Wall Street futureslower
* Italian elections, German coalition vote on Sunday
* Trump tweets "trade wars are good, and easy to win"
By Marc Jones
LONDON, March 2 (Reuters) - The spectre of a global tradewar sent world stocks tumbling towards a 2.5 percent weekly losson Friday, and left bruised investors reaching for thetraditional antidotes - government bonds, gold and the Japaneseyen.
The falls came after U.S. President Donald Trump said theUnited States would impose tariffs of 25 percent on importedsteel and 10 percent on aluminium, sparking concerns ofretaliatory moves from major trade partners China, Europe andneighbouring Canada. STOXX 600 index .STOXX fell over 1.5 percent ledby a near 5 percent slump from world's biggest steelmakerArcelorMittal SA MT.AS and 2.5 - 6 percent drops from theregion's carmakers .SXAP worried that they might be next. .EU
Wall Street futures were also pointing lower for what wouldbe a fourth straight day and another difficult week for thebenchmark S&P 500 ESc1 , Dow Jones Industrial 1YMc1 andNasdaq indexes .N .
"Trade wars are good, and easy to win," Trump's first Fridaytweet said, which only acted to inflame the markets' nerves.
The dollar .DXY and U.S. Treasury yields both fell as theyappeared to push aside considerations of inflation, a majortheme that spooked financial markets over the last month.
Ten-year U.S. Treasuries yields US10YT=RR dipped to 2.8024percent, hitting its lowest level in three weeks and furtherextending the distance from its four-year peak of 2.957 percenttouched on Feb 21.
The dollar fell across the board including to more than oneyear low against the yen at 105.54 JPY= . FRX/
"It is a real worry because Europe is a open global economyso it isn't just about U.S. versus China," said Ian Ormiston, aEuropean equity fund manager at Old Mutual Global Investorsabout Trump's moves. "And we will see retaliation there are notwo ways about it."
Europe's market moves compounded what was already a fragilemood ahead of a crunch few days of politics.
Britain's under-fire Prime Minister Theresa May will fleshout her Brexit plans later, while Germany will find out if itfinally has a coalition government on Sunday withItaly also holding delicately-poised elections that day. with the simmering trade war nerves it wasunsurprising then that safe-haven demand was on the rise.
German Bunds - Europe's credit market benchmark - saw theiryields fall to a five-week low of 0.618 percent DE10YT=RR asItaly's BTP yields dropped to a two-week low of 2.008 percent. IT10YT=RR
"I am surprised how little risk the market is pricing fromthis," said the Chief Investment Officer of Pictet WealthManagement Cesar Perez Ruiz, referring to the Italian elections.
STEEL BUCKLES
The trade nerves had dominated Asian market moves.
Japan's Nikkei .N225 tumbled 2.5 percent to end the weekdown 3.3, while MSCI's broadest index of Asia-Pacific sharesexcluding Japan .MIAPJ0000PUS dropped 0.9 percent to take itslosses for the week to 2.1 percent.
Steelmakers were hit the hardest there too with SouthKorea's Posco 005490.KS down 3.3 percent and Japan's NipponSteel 5401.T off 3.8 percent.
Toyota Motor 7203.T shares skidded 2.4 percent too afterthe automaker had said the planned tariffs would substantiallyraise the production costs and therefore prices of cars andtrucks sold in America. Thursday on Wall Street, the S&P 500 .SPX had lost36.16 points, or 1.33 percent, to 2,677.67, coming a day after aanother heavy sell on worries the Federal Reserve might increaseit interest rates more than expected this year.
The anxiety over tit-for-tat trade tariff moves wasunderscored by Canada's quick response, with officials in Ottawasaying they will retaliate. China and the EU bothfollowed, saying that they will safeguard their interests.
"The measures that we are prepared to take will prove thatwe will, on the basis of the rules, not hesitate to protect ourindustry," a European Commission spokesman said. concerns also eclipsed upbeat U.S. economic dataincluding a 14-year high in manufacturing figures and a 48-yearlow in the number of Americans filing for unemployment benefits. the currency market, the dollar's retreat saw the euro EUR= jump back to $1.2273, after having hit a seven-week lowof $1.21545 on Thursday.
The yen had got an additional boost when Bank of JapanGovernor Haruhiko Kuroda said he would mull an exit from theBOJ's current stimulus regime if the central bank's 2 percentinflation target is achieved in 2019. dollar index is down 2.1 percent this year, dogged bysuspicions that the Trump administration prefers a weaker dollarto help narrow the United States' yawning trade deficit.
Worries that Trump's big tax cuts and spending plans willramp up fiscal deficits to the extent that they undermineconfidence in U.S. debt have also hurt the greenback though ithad been on the rise again in recent weeks.
Oil prices were also under pressure, having fallen more than1 percent the previous day on trade friction fears.
U.S. crude CLc1 was little changed in European trade at$60.88 per barrel, having fallen to two-week low of $60.18 onThursday. It is down 3.7 percent so far this week.
Brent futures LCOc1 traded at $63.74 per barrel having hita two-week low of $63.19.
"The world stands on the brink of a trade war," said RobertCarnell, head of research, Asia-Pacific at ING in Singapore."Forget the yield curve - this is how recessions start."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^U.S. STEEL PRODUCTS IMPORTS BY COUNTRY OF ORIGIN
http://reut.rs/2FiF3gm
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Addtional reporting by Hideyuki Sano; Editing by AngusMacSwan)