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Trump threatens 25% tariff on non-US made iPhones

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German stocks fall from near record levels

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Bond yields slip after run-up

(Updates after markets close)

By Sruthi Shankar, Medha Singh, Ragini Mathur and Purvi

Agarwal

May 23 (Reuters) - European shares closed sharply lower

on Friday after U.S. President Donald Trump ramped up threats of

tariffs on the European Union and smartphone giant Apple ( AAPL ),

reigniting fears of a damaging global trade war.

Trump said he is recommending a straight 50% tariff on goods

from the EU starting on June 1, which would result in stiff

levies on luxury items, pharmaceuticals and other goods. He also

threatened Apple ( AAPL ) with a 25% tariff on any iPhones sold, but not

manufactured, in the United States.

"This latest move threatens a full-scale escalation of the

global trade war. European markets will suffer, undoing some of

the strong momentum we have seen in recent months," Lindsay

James, investment strategist at Quilter, said.

"What happens next is anyone's guess, but it is unlikely the

EU simply rolls over following this latest development."

The pan-European STOXX 600 index closed 0.9% lower,

and marked a weekly decline, its first in six. The index logged

its biggest one-day fall since April 9.

A gauge of euro zone stocks took a sharper 1.5%

hit, with declines on London's FTSE 100 contained, as

the country clinched a trade deal with the U.S. earlier this

month.

The Euro STOXX Volatility index spiked to its

highest in more than three weeks.

The STOXX 600 had recovered from its early April slump after

trade deals between the U.S. and some trading partners had

calmed worries over trade tensions.

On Friday, automobiles and parts, expected to take

the biggest hit from tariffs, led broader declines with a 3.1%

fall. Economically-sensitive banks shed 1.8%, while an

index of luxury goods dropped 2.7% as they are highly

exposed to the U.S. market.

Germany's DAX fell 1.5% after coming within

spitting distance of a record high earlier in the day when data

had shown that the country's economy grew significantly more in

the first quarter than previously estimated.

Indexes in France, Spain and Italy,

were down more than 1% each.

The benchmark 10-year European government bond yield

dropped along with its U.S. counterpart

on raised concerns about slowing economic growth.

Traders bet on more interest rate cuts from the European

Central Bank, expecting the deposit rate to reach 1.60% by

December from 1.72% before Trump's comments.

British investment platform AJ Bell jumped 8.4%

after it posted a 12% year-over-year rise in half-yearly profit

before tax, benefiting from increased client activity.