NEW YORK (Reuters) - Global equity markets rallied on Tuesday as the latest tit-for-tat U.S.-Chinese trade dispute was seen as barely denting world growth, while U.S. Treasury yields rose in anticipation the Federal Reserve will hike interest rates this year and next.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 18, 2018. REUTERS/Brendan McDermid

China said it will levy tariffs on about $60 billion worth of U.S. goods, as previously planned, but cut the level of tariffs it will collect. U.S. President Donald Trump on Monday said 10 percent tariffs on $200 billion of Chinese products will start next week and reach 25 percent by year-end.

MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.48 percent. Chinese shares initially slid as investors in Asia digested the details of China's response but then rallied to push the blue-chip CSI index .CSI300 up 2 percent.

China has limited retaliatory levers it can pull on the tariff front, said Anthony Saglimbene, global market strategist at Ameriprise Financial Services in Troy, Michigan.

Any escalation is likely to involve its currency or making it harder for U.S. companies to operate in China, but the immediate dent on the economic picture is likely to be small, he said.

“We anticipate this last round of tariffs, the $200 billion, it’s only probably going to add 0.2 percentage points to consumer prices. That’s nothing,” Saglimbene said.

“The market is smart and it’s sniffing out through the end of the year the tariff impact is likely to be small on economic growth and it’s small on corporate profits,” he added.

The United States took 300 consumer products off its original list of products to receive tariff hikes, which will blunt the impact on the consumer, Saglimbene said.

Dutch bank ING estimated that 2.5 percent of world trade was now affected by the tariffs and it will be 4 percent if Trump carries out threats to put levies on all Chinese imports.

In Europe, the pan-regional FTSEurofirst 300 index .FTEU3 of leading shares closed up 0.15 percent. Wall Street rallied.

The Dow Jones Industrial Average .DJI rose 184.84 points, or 0.71 percent, to 26,246.96. The S&P 500 .SPX gained 15.51 points, or 0.54 percent, to 2,904.31 and the Nasdaq Composite .IXIC added 60.32 points, or 0.76 percent, to 7,956.11.

MSCI's 24-country emerging market index .MSCIEF was up for the fourth day in the last five.

Despite all the noise, the widely tracked dollar currency index .DXY rose 0.14 percent, with the euro EUR= slid 0.16 percent to $1.1664.

The Japanese yen JPY= weakened 0.43 percent versus the greenback at 112.31 per dollar.

U.S. benchmark 10-year and 30-year yields both climbed to fresh four-month peaks as investors continued to price in more interest rate increases by the Fed this year and next.

Benchmark 10-year notes US10YT=RR fell 13/32 in price to lift its yield to 3.0514 percent.

(Graphic: Ramping up tariffs: reut.rs/2pgyVM1)

In Europe, Italian government bond yields fell sharply on growing optimism that Italy’s new coalition budget will respect European Union rules on fiscal discipline.

Two- and five-year yields fell as much as 15 basis points to their lowest levels since July, while yields on short-dated top-rated German debt rose to four-month highs.

Oil rose almost $1 a barrel on signs the Organization of the Petroleum Exporting Countries would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signaled it was in no rush to bring prices down.

U.S. crude CLcv1 rose 94 cents to settle at $69.85 per barrel and Brent LCOcv1 settled up 98 cents at $79.03 per barrel.

U.S. gold futures GCcv1 $2.90 to settle at $1,202.90 an ounce.

(Graphic: Global assets in 2018: tmsnrt.rs/2jvdmXl)

(Graphic: World FX rates in 2018: tmsnrt.rs/2egbfVh)

(Graphic: Emerging markets in 2018: tmsnrt.rs/2ihRugV)

(Graphic: MSCI All Country World Index Market Cap: tmsnrt.rs/2EmTD6j)

(Graphic: Euro zone periphery govt bond yields: tmsnrt.rs/2ii2Bqr)