TREASURIES-Yields rise as trade war escalates, raising inflation fears

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Fears of inflation send yields higher as tariffs implemented

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Producer prices unexpectedly unchanged in February

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Treasury to sell $22 bln in 30-year bonds

By Karen Brettell

March 13 (Reuters) - U.S. Treasury yields rose on Thursday on concerns about the potential for higher inflation as a war over tariffs between the United States and trading partners escalates.

The move comes despite data showing U.S. producer prices were unexpectedly unchanged in February, which although likely welcome news for the Federal Reserve is seen as backward looking as it covers the period before tariffs were put in place.

"There's a tremendous amount of uncertainty due to all these tariffs," said Tom di Galoma, managing director at Mischler Financial Group.

U.S. President Donald Trump said on Thursday that he would put a 200% wine tariff on all wines and other alcoholic products coming out of the European Union if the bloc did not remove its tariff on whiskey.

Trump's 25% duties on all U.S. steel and aluminum imports took effect on Wednesday and he threatened further tariffs on EU goods, as major U.S. trading partners said they would retaliate for trade barriers already erected by the U.S. president.

Other data on Thursday showed that the number of Americans filing new applications for unemployment benefits fell last week, though traders remain on alert for a sharp increase as the federal government implements large layoffs.

The yield curve has also steepened month in line with moves in European government debt, di Galoma said.

Yields on German bunds have jumped on plans by German politicians to massively increase fiscal spending.

The yield on benchmark U.S. 10-year notes was last up 2.1 basis points on the day at 4.337%. The 2-year note yield rose 0.2 basis points to 3.997%.

The yield curve between two-year and 10-year notes steepened by around two basis points to 34 basis points.

The Treasury will sell $22 billion in 30-year bonds on Thursday, the final sale of $119 billion in coupon-bearing debt this week.

The U.S. government saw fair demand for a $39 billion sale of 10-year notes on Wednesday and a $58 billion auction of three-year notes on Tuesday.

(Reporting By Karen Brettell; Editing by Nick Zieminski)