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METALS-Escalating U.S.-China trade dispute hits copper prices

* China’s trade surplus with U.S. rose to record in August

* Chinese copper imports fall in August

* Aluminium benchmark spread moves to widest in over 3 years (Updates with closing prices)

LONDON, Sept 10 (Reuters) - Copper prices fell on Monday after U.S. President Donald Trump threatened to impose tariffs on virtually all Chinese imports into the United States, escalating the trade dispute and stoking fears of weaker demand for industrial metals.

Benchmark copper on the London Metal Exchange closed 0.4 percent down at $5,910 a tonne, a loss of about 20 percent since hitting a 4-1/2 year high of $7,348 in June. It crashed to a 14-month low of $5,773 on Aug. 15.

“The trade dispute is not going to disappear. The market still does not fully understand this and has not completely priced this in,” said Commerzbank analyst Eugen Weinberg, adding that he expects to see larger losses.

“If a large proportion of Chinese exports to the U.S. are subject to penalties, there will be a massive impact on trade flows and it will probably change companies’ investment plans.”

TARIFFS: Trump on Friday threatened duties on another $267 billion of Chinese goods on top of $200 billion in imports primed for levies in coming days and Beijing said it would respond.

Wood Mackenzie estimates the expansion of the tariff list could raise the impact to around 1 percent of total Chinese copper demand, as many copper intensive goods are included in the extended list.

SURPLUS: China’s trade surplus with the United States widened to a record in August even as its export growth slowed slightly, an outcome that could push Trump to turn up the heat on Beijing.

CHINA: China is the world’s largest consumer of copper, accounting for nearly half of global demand estimated at around 24 million tonnes this year.

COPPER: China’s imports of copper fell 6.7 percent from a month ago to 420,000 tonnes in August, data showed.

ALUMINIUM: A report that Russian aluminium producer Rusal may start output cuts this month helped aluminium to rebound, ending the day 1.3 percent higher at $2,095 a tonne.

Last week Reuters reported that European customers would avoid deals with Rusal during annual talks on supply deals.

ALUMINIUM SPREADS: The discount of the LME aluminium cash contract to the three-month contract CMAL0-3 increased to $39 a tonne, the highest since July 2015. Usually that move in the benchmark spread would indicate increased supply of the metal, but traders said it was mostly driven by technical issues.

LEAD: A large holding - between 50 and 79 percent - of cash contracts and warrants is creating some nervousness about shortages on the LME market ahead of seasonally strong demand from battery makers. <0#LME-WHL>

DOLLAR: A softer U.S. currency helped support prices of industrial metals, as it makes dollar-priced commodities cheaper for holders of other currencies.

PRICES: Zinc fell 1.6 percent to close at $2,381, lead slid 2.4 percent to $2,028, tin ceded 0.3 percent to $19,005 and nickel added 0.5 percent to $12,410.

Reporting by Pratima Desai; additional reporting by Melanie Burton in Melbourne and Eric Onstad in London; editing by Mark Heinrich