GLOBAL MARKETS-Stocks, yuan tumble as U.S.-China trade dispute escalates

* Global stocks gauge set for worst day of 2019

* China’s yuan weakest since late December

* China to impose tariffs on U.S. goods despite Trump warning

* U.S. Treasuries, yen benefit from safe-haven bid

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NEW YORK, May 13 (Reuters) - Global stocks tumbled on Monday and the Chinese yuan fell to its lowest level since December as a trade dispute between the United States and China escalated.

MSCI’s gauge of stocks across the globe shed 1.82%, on pace for its biggest one-day drop of 2019 as it touched a two-month low. Wall Street’s main indexes tumbled over 2% in initial trading.

China said it would impose higher tariffs on a range of U.S. goods, striking back in its trade war with Washington shortly after U.S. President Donald Trump warned it not to retaliate in the long-running trade dispute between the world’s two biggest economies.

Investors piled into safe-haven assets, including U.S. Treasuries and the Japanese yen.

“It’s clear that there is a lot of nervousness around the U.S.-China trade negotiations and concern that it’s really deteriorating pretty significantly and that’s impacting all areas of markets,” said Kristina Hooper, chief global market strategist at Invesco in New York.

China’s finance ministry said it plans to set import tariffs ranging from 5 percent to 25 percent on a target list worth about $60 billion. Trump on Friday ordered his trade chief to begin the process of imposing tariffs on all remaining imports from China, but investors had taken solace in some comments from officials about the negotiations.

Investors “have hoped for the best and wanted to believe the best. So they hold onto any small sign of better relations between U.S. and China,” Hooper said.

But, she added, “clearly this relationship is deteriorating. It’s not what investors had hoped it was on Friday.”

On Monday, the Dow Jones Industrial Average fell 612.77 points, or 2.36%, to 25,329.6, the S&P 500 lost 68.52 points, or 2.38%, to 2,812.88 and the Nasdaq Composite dropped 250.57 points, or 3.17%, to 7,666.37.

The pan-European STOXX 600 index lost 1.03%.

In currencies, the yuan weakened to as far as 6.92 against the U.S. dollar, its lowest level since Dec. 24.

The dollar index, which measures the greenback against a basket of currencies, fell 0.06%, with the euro up 0.01% to $1.1234.

U.S. Treasury yields fell to six-week lows as investors piled into low-risk assets.

Benchmark 10-year notes last rose 15/32 in price to yield 2.4015%, from 2.455% late on Friday.

Ten-year yields fell below those on three-month Treasury bills. A sustained inversion of this part of the yield curve has preceded every U.S. recession in the past 50 years.

Spot gold added 0.9% to $1,297.60 an ounce.

Oil prices were boosted by growing concern over supply disruptions in the Middle East.

U.S. crude fell 0.05% to $61.63 per barrel and Brent was last at $70.81, up 0.27% on the day.

Additional reporting by Karen Brettell and Richard Leong in New York, Thyagaraju Adinarayan in London; editing by Larry King and Nick Zieminski