Updates with afternoon levels

By Niket Nishant and Ragini Mathur

June 3 (Reuters) - Latin American stocks and currencies fell on Wednesday as investors retreated from riskier assets, rattled by renewed fighting in the Middle East and fresh concerns that higher U.S. tariffs could hit some of the region's largest economies.

The MSCI index of Latin American stocks .MILA00000PUS fell 2.6% to its lowest in more than two months, while the corresponding currencies gauge .MILA00000CUS dropped 0.9%.

Brazilian equities .BVSP fell 2.3% to over four-month lows and were among the biggest decliners in the region, a day after a U.S. proposal for a new punitive tariff of 25% on many imports from Brazil.

The country's currency BRL= also fell 1.4% to near two-month lows, against a stronger U.S. dollar.

Top U.S. trade official Jamieson Greer said the tariff was in response to what he alleged were unfair trade practices over issues ranging from digital trade to illegal deforestation.

The Trump administration also proposed ​new tariffs of up to 12.5% on imports from 60 economies, arguing that they had failed to curb trade in goods made with forced labor.

Under the proposal, imports from major Latin American economies such as Argentina and Mexico would be hit with 10% additional duties.

Mexico said on Wednesday that goods complying with rules of origin under the United States-Mexico-Canada Agreement would be exempt from the proposed tariffs.

Mexican stocks .MXX dipped 0.8% and the peso MXN= slipped 0.3%. Argentina's Merval .MERV stock index also fell 2.2%, while the peso ARS=RASL dropped 0.8%.

"Trump tariffs are coming back, but by a different name. The pretexts hardly matter; higher tariffs are on the way," said Hasnain Malik, head of geopolitical risk and EM equity strategy research at Tellimer.

In February, the U.S. Supreme Court struck down President Donald Trump's sweeping tariffs he had imposed last year under a law meant for use in national emergencies.

RENEWED MIDDLE EAST WORRIES WEIGH

Hostilities in the Gulf flared again on Wednesday as Iranian attacks ​on Kuwait damaged its airport and injured dozens, while the U.S. military carried out strikes near the Strait of Hormuz, with diplomacy to halt the war showing little sign of ‌progress.

"The situation has deteriorated significantly, although both sides have held off from declaring an end to the ceasefire," said David Morrison, senior market analyst at Trade Nation.

"Everything depends on the U.S. and Iran keeping communications open and resuming talks."

The flare-up forced investors to rethink a central market assumption that the war would move toward negotiations rather than another round of escalation.

In Colombia, equities .COLCAP eased 1.5%, snapping gains from earlier in the week. A strong first-round showing by right-wing presidential candidate Abelardo de la Espriella had helped lift Colombian assets.

Peruvian equities .MXNUAMPESCPGPE also fell 2.7%, leading regional declines as prices of copper and gold, its top exports, eased.

Investors were also watching Peru's presidential runoff on Sunday. Conservative Keiko Fujimori, who won the largest share of votes in April's first round, will face leftist Congressman Roberto Sanchez, who narrowly secured second place.

Key Latin American stock indexes and currencies:

Stock indexes	Latest	Daily % change
MSCI Emerging Markets .MSCIEF	1782.8	-0.35
MSCI LatAm .MILA00000PUS	2953.4	-2.57
Brazil Bovespa .BVSP	170242.2	-2.27
Mexico IPC .MXX	68372.62	-0.75
Chile IPSA .SPIPSA	10357.69	-1.06
Argentina MerVal .MERV	3154203.59	-2.17
Colombia COLCAP .COLCAP	2232.14	-1.45
Currencies	Latest	Daily % change
Brazil real BRL=	5.0746	-1.38
Mexico peso MXN=	17.341	-0.34
Chile peso CLP=	894.8	-0.86
Colombia peso COP=	3565.14	0.07
Peru sol PEN=	3.4096	-0.22
Argentina peso (interbank) ARS=RASL	1,438.5	-0.81
Argentina peso (parallel) ARSB=	1,410.0	1.74