By Andrew Galbraith and Hideyuki Sano
SHANGHAI/TOKYO (Reuters) - Faltering Chinese markets dented Asian stocks on Friday morning, as the time neared when Washington would impose tariffs on Chinese imports, a move many investors fear would trigger a full-scale trade war between the world's two largest economies.
The U.S. tariffs are due to take effect at 0401 GMT.
At 0315 GMT, MSCI's broadest index of Asia-Pacific shares outside Japan was 0.4 percent lower, pulling back from a modest early rise. The index has lost 8.9 percent since June 7.
The Shanghai Composite index fell 1.1 percent to 2,706, getting close to its January 2016 low of 2,638. The blue-chip CSI300 index was down 0.9 percent.
"China will surely take retaliatory steps, to which U.S. President Donald Trump has threatened more tariffs. Trade war has exited as a concept for some time but now it has become a reality," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
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Seoul's Kospi index fell 0.25 percent and shares in Taiwan were 0.4 percent lower.
Japan's Nikkei stock index was 0.7 percent higher after closing at a three-month low on Thursday.
U.S. and European shares had been boosted on Thursday by reassuring economic data from Germany, and as automakers' shares jumped, with German Chancellor Angela Merkel saying she would back lowering European Union tariffs on U.S. car imports after Washington offered to scrap threatened tariffs on European cars.
That backdrop of easing tensions helped the Nikkei's broad rebound, with automaker Honda Motor Co jumping 2 percent and Toyota Motor Corp rising 1.9 percent.
But in early trade on Friday, the focus remained on U.S. tariffs.
On Thursday, U.S. President Donald Trump confirmed that the United States would begin collecting tariffs on $34 billion worth of Chinese imports at 12:01 a.m. Washington time (0401 GMT) on Friday, and warned that subsequent rounds could see tariffs imposed on more than $500 billion worth of goods.
"The risk that further escalation derails growth is keeping some investors cautious," ANZ analysts said in a note Friday.
The Sino-U.S. trade dispute has roiled financial markets including stocks, currencies and the global trade of commodities from soybeans to coal over the past several weeks.
Newly released minutes from the U.S. Federal Reserve's last policy meeting on June 12-13 showed policymakers discussed whether recession lurked around the corner, and expressed concerns global trade tensions could hit an economy that by most measures looked strong.
The yield on benchmark 10-year Treasury notes was at 2.8364 percent, compared with a U.S. close of 2.840 percent.
The two-year yield, which rises with traders' expectations of higher Fed fund rates, was at 2.553 percent compared with a U.S. close of 2.561 percent.
Gold, which is sensitive to rising interest rates, was 0.3 percent lower. Spot gold traded at $1,252.0 per ounce. [GOL/]
The dollar was little changed against the yen at 110.67 .
The single currency was down a hair on the day at $1.1685, while the dollar index, which tracks the greenback against a basket of six major rivals, was flat at 94.474.
After ticking slightly higher, oil prices fell after U.S. government data showed an unexpected jump in crude oil stockpiles.
However, the market remains nervous on concerns over tariffs amid an increasingly tight oil market.
Tensions between the U.S. and Iran continued to rise as the U.S. Navy said it stood ready to ensure free navigation and the flow of commerce, after Iran's Revolutionary Guards threatened to block oil shipments through the Strait of Hormuz.
U.S. crude fell 0.1 percent at $72.85 a barrel. Brent crude was 0.25 percent lower at $77.20 per barrel.
(Editing by Shri Navaratnam and Richard Borsuk)