European shares dip as Trump widens trade war, EU tariffs in focus

• DNB down after Q2 profit miss
• BP up on higher Q2 upstream production forecast
• Gjensidige crowns STOXX after Q2 beat

July 11 (Reuters) - European shares fell on Friday after the U.S. President Donald Trump stepped up his tariff threats against Europe, while investors awaited a potential letter for levies on the 27-nation bloc.

The pan-European STOXX 600 index .STOXX was down 0.7% at 548.98 points, as of 0829 GMT, but was on track to log a weekly gain.

Germany's DAX .GDAXI, which traded at a record high in the previous session, fell 0.9%, while France's CAC40 .FCHI slipped 0.8%. Britain's FTSE .FTSE fell 0.3% after touching a brief record high earlier in the session. Spain's IBEX .IBEX declined 0.6%.

Trump on Thursday said the European Union could receive a letter on tariff rates by Friday, throwing into question the progress of trade talks between Washington and the bloc.

He also announced a 35% tariff rate on all imports from Canada from August 1 and floated a blanket 15% or 20% tariff rate on other countries, up from the current 10% baseline rate.

"The EU has been negotiating with the U.S. about the sector tariffs and also about the reciprocal tariffs...everybody was expecting that there would be a better trade deal coming, but now it looks like it will be a worse outcome", said Jochen Stanzl, chief market analyst at CMC Markets.

Stanzl added the recent rally in Germany's DAX was on hopes of a better trade deal with the U.S. However, the move against Canada, despite weeks of talks, raises questions about the EU-U.S. negotiations.

Trump, whose global wave of tariffs from early April has upended businesses, has broadened his trade war this week, setting new tariffs on a number of countries, along with a 50% tariff on copper.

In the market, European banks .SX7P led broad declines, down 1.3%, with DNB bank DNB.OL falling 7.8% after Norway's largest lender reported smaller-than-expected quarterly earnings.

Conversely, the energy sector .SXEP hit a more-than-two-week high, last up 0.4%, after BP BP.L gained 2.6% on reporting higher-than-forecast upstream production in the second quarter.

Gjensidige Forsikring GJFG.OL rose 5.8% to a record high, after the Norwegian insurer reported better-than-expected topline results for the quarter.

Storebrand STB.OL gained 3.5%, after the Norwegian savings and insurance group reported a 6 percentage point improvement in its combined ratio in the second quarter.

Meanwhile, the hurdle for another interest rate cut by the European Central Bank is "very high" as the euro zone economy is holding up better than expected and inflation is moored at 2%, ECB board member Isabel Schnabel said in an interview.