* Trump imposes 10 pct tariffs on $200 bln goods from China
* China says will retaliate, but markets shrug
* China bluechip shares up 2 percent as Asia rallies
* European stocks, U.S. futures go higher
* Dollar flat in FX markets, government bonds make ground
* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
LONDON, Sept 18 (Reuters) - Who's afraid of the big bad trade war? Not world stock markets it seems.
The response to U.S. President Donald Trump's decision to go ahead next week with collecting 10 percent tariffs on another $200 billion of Chinese goods, ratcheting up to 25 percent in January, was unusual and unexpected on Tuesday.
It initially hit U.S. stocks, Treasuries and the dollar /FRX while stirring a rally in Chinese equities .SS and the yuan in Asia. CNH=
China then confirmed it would retaliate but still traders barely flinched.
European stocks gained over a third of one percent on course for a third day of gains, Wall Street futures climbed ESc1 and even copper MET/L and the Aussie dollar AUD=D3 which have been highly sensitive to the trade tensions in recent months held firm.
"In a way it is remarkable that the market is holding up so well," said Rabobank's Head of Macro Strategy Elwin de Groot.
"This is clearly a further ratcheting up of the trade war and we are now getting close to a situation where you can almost speak of a full-fledged trade war. Clearly that is not positive."
One theory for the becalmed reaction was that the $200 billion U.S. move had been largely priced in to markets following weeks of reports and social media speculation.
Chinese shares did dip initially as Asia digested the details but then rallied to push the blue-chip CSI index .CSI300 up 2 percent. Some locals were betting that Beijing will step up infrastructure investment to keep the economy humming. Nikkei .N225 also ended 1.4 percent higher and MSCI's 24-country emerging market index was up for the fourth day in the last five as 1 percent gains in Poland and a 0.7 percent rise in Russia added to Asia's rebound.
Trump's announcement "is largely consistent with the claims made earlier," Citi analysts said in a note, estimating a 33 basis point drag on China's economic growth from the 10 percent tariff.
"The trade war may get worse before it gets better. A full-blown trade war looms closer now," they added however.
China's promise to respond to the new U.S. tariffs also came as The South China Morning Post newspaper reported Beijing was reviewing plans to send a delegation headed by Vice Premier Liu He to Washington for trade talks.
LIQUIDATING SHORTS
In currencies, the dollar was broadly flat at 94.438 .DXY although on an individual basis it was a fraction firmer against the Japanese yen at just shy of 112 JPY= .
At the same time it was down slightly against the Chinese yuan in 'offshore' markets CNH=D3 . The sensitive Australian dollar AUD=D3 also moved up 0.4 percent to $0.7212 having also initially been hit when the tariff details broke. AUD/
With FX participants wary that Beijing authorities may quickly step in to markets at any point, investors were "spontaneously" liquidating their short yuan positions said a trader at one Chinese bank.
"China is likely to reject the invitation from the U.S. Treasury for the new round of trade talk," OCBC Bank also said in a note on Tuesday.
Oil prices fell on worries rising trade tensions could dent global demand for crude.
U.S. crude futures CLc1 fell 21 cents to $68.70 a barrel while international benchmark Brent futures LCOc1 lost 35 cents to $77.70 per barrel.
Gold was weaker too, with spot prices XAU= down 0.1 percent at $1,199.2 an ounce.