By Emma Rumney, Yadarisa Shabong and Stine Jacobsen
(Reuters) -Diageo warned on Tuesday of a $200 million hit to its operating profits from U.S. tariffs on Mexican and Canadian imports and German auto supplier ZF flagged price hikes, as companies start counting the likely costs of Donald Trump’s trade measures.
U.S. President Trump said at the weekend he would impose 25% tariffs on goods from Mexico and Canada and 10% on China, but on Monday agreed to a 30-day delay for his neighbours.
Finance chief Nik Jhangiani said Diageo anticipates $200 million would be wiped off operating profits for the financial year to June 30 if tariffs are enforced from March 1.
That estimate is among the first by a big global company during the fourth-quarter earnings season, as executives try to keep up with changing U.S. trade policies that threaten to upend industries from autos to consumer goods to energy.
Earlier on Tuesday, China imposed targeted tariffs on imports from the United States and put several U.S. companies, including Google, on notice for possible sanctions.
Trump’s tariffs and those retaliatory measures knocked European stocks, U.S. stock futures and the dollar. [MKTS/GLOB]
Any duties on goods imported from the three largest U.S. trade partners will present a fresh challenge for companies already facing lacklustre demand, particularly in China, and prolonged rises in labour and raw materials costs.
Jhangiani said Diageo has plans in place to mitigate the impact, although CEO Debra Crew said its early assessment does not take into account further escalations or retaliatory action.
“We feel today that we could cover around 40% of that ($200 million) before any pricing actions,” Jhangiani told a media call after the company scrapped its sales growth targets.
Diageo, the world’s leading spirits maker, generates around 45% of sales in the United States, its biggest market, from products that must be made in either Mexico or Canada, such as Don Julio tequila and Crown Royal Canadian whisky.
Its shares were down 2.4% after hitting their lowest since March 2020 in early European trade and dragged rivals Campari and Pernod Ricard lower too.
ZF, a major auto supplier exporting from Mexico to the United States, said on Monday it would have little choice but to pass at least some of the cost of tariffs onto consumers via higher prices.
Tariffs would cause “dramatic and immediate” financial fallout for U.S. automakers and others manufacturing vehicles in Mexico and Canada to sell in the United States, said Sam Fiorani, vice president at research firm AutoForecast Solutions.
