EMERGING MARKETS-Latam stocks drop as Trump unleashes fresh tariff threats

By Nikhil Sharma and Pranav Kashyap

May 23 (Reuters) - Latin American equities fell on Friday, as U.S. President Donald Trump's latest unexpected trade bombshell blindsided investors, adding a fresh layer of volatility on top of anxieties surrounding his sweeping tax-cut bill.

A gauge for the region's equities .MILA00000PUS lost 0.8% on the day, while a similar index for currencies .MILA00000CUS fell 0.3%, set to snap its four-day winning streak.

Global markets were convulsed by Trump's statement on Truth Social that he is recommending a 50% tariff on all European Union goods, effective June 1.

This instantly reignited an acute tariff-centric panic, which had assuaged in recent weeks with a series of U.S. deals with trading partners, including the United Kingdom and China.

In a separate threat, he targeted smartphone giant Apple AAPL.O, brandishing a 25% tariff if its iPhones are not manufactured in the United States.

Wall Street's main indexes fell sharply on Friday. .N

Risk sentiment was already on precarious footing as markets continued to wrestle with the long-term fiscal fallout of President Trump's tax overhaul, a package projected to swell the U.S. debt burden by a colossal $3.8 trillion over the coming decade.

"Just when we thought it was all quiet on the tariff front and we'd all started worrying again about the U.S. deficit... Trump threatens the EU with bucketloads more," ING analysts said.

The region's currencies were largely fueled by a weaker dollar =USD which was poised to break a four-week run of gains. FRX/

The broader currency index also was up 0.4% for the week, taking its overall gains to 12.4% for the year.

Brazil's real BRL= gained 0.5% against the dollar. Still it was set for a 0.8% loss for the week.

Foreign investors took a breather after Brazil on Thursday night retreated from part of the measures announced hours earlier to increase the financial transactions tax (IOF) on money sent abroad.

The country's finance minister said the revision was made to avoid speculation about discouraging investments.

"It remains unclear how much of these estimates will materialize now that most of these measures have been withdrawn," Dev Ashish, Latin America economist at Societe Generale said.

Sao Paulo's stock index .BVSP was the worst performer among its peers this week, down 1.4%, mostly dragged by lower crude prices.

On the day, Chile's peso CLP= ticked up 0.38%, while stocks in Santiago .SPIPSA lost 0.5%. Colombia's peso COP= rose 0.46%.

Argentina's stock index .MERV fell 1%, while Mexico's local bourse .MXX lost 0.7%.

Mexico's peso MXN= was trading flat for the day. Data showed a $83 million trade surplus for the country in April when adjusted for seasonal swing.

This week, it shed 0.7% as a series of discouraging data releases kept the currency under pressure. The country's inflation spiked outside the central bank's target range for the first time this year.

A bleak economic outlook, coupled with uncertainty unleashed by Trump's trade policies, complicates the path for the Bank of Mexico to continue cutting rates.