US markets retreated on Fridayafter the White House reaffirmed plans to introduce new tariffs against Mexico, Canada and China beginning February 1.

US equities had spent much of the day in the black after Apple results and US inflation data that met expectations.

But in a briefing on Friday, White House Press Secretary Karoline Leavitt said tariffs against the three US trading partners would be imposed on Saturday, adding: "These are promises made and promises kept by the president."

"The tariff talk in the afternoon injected a new wave of uncertainty," Briefing.com's Patrick O'Hare told AFP.

"We think it just kind of proved to be a bit of a trigger for people to take some money off the table going into the weekend," he said.

The Dow Jones Industrial Average closed down 0.8 percent at 44,544.66, the S&P 500 lost 0.5 percent to finish at 6,040.53 and the Nasdaq Composite eased 0.3 percent to 19,627.44.

AI-related stocks, particularly key chipmaker Nvidia, had plunged early in the week after China's DeepSeek unveiled an artificial intelligence model rivalling those of American tech giants but developed at a fraction of the cost.

Markets later clawed back most of those losses thanks to encouraging earnings and company strategy updates, and as some investors re-evaluated the risks US firms face from Chinese competition.

Financial markets also digested the latest US inflation data, with the Federal Reserve's favourite inflation gauge, the Personal Consumption Expenditures index, accelerating for a third month in a row, reaching 2.6 percent in December as expected.

"While there's still further progress to be made on inflation, investors can breathe a sigh of relief and refocus on the market's more notable fundamentals, like earnings growth and the economy," said Bret Kenwell, US investment analyst at the eToro trading platform.

Earlier, London's benchmark FTSE 100 hit fresh highs, helped by an almost 12 percent surge in the share price of Smiths Group after the British engineering company said it planned to streamline its business and return substantial sums to shareholders.

Paris and Frankfurt ended little changed as early rises fizzled. European stocks had one of their best months in two years in January with Europe-wide indexes rising six percent since the start of 2025.

Data showed German inflation unexpectedly slowed in January, the first decline in months, bolstering the case for further rate cuts by the European Central Bank.

The ECB cut rates on Thursday, its fifth reduction since June.

Concerns over Trump's trade tactics pushed gold to new records above US$2,800 an ounce.

"The gold price is proving its haven credentials, as investors choose it to hedge fears about Trump's tariff threats," said Kathleen Brooks, research director at XTB. (AFP)