Spirits giant Diageo says Trump tariffs could hit profits by £161m

Johnnie Walker and Guinness maker Diageo has warned that US President Donald Trump’s proposed US tariffs could deal a £161m blow to profits.

The spirits giant scrapped a key sales target because of growing uncertainty linked to the tariffs and volatile consumer demand.

Diageo, which also makes Gordon’s gin and Baileys, said it is talking to the US Government over upcoming tariff policies, which could “impact” its sales recovery.

Over the weekend, the Trump administration confirmed plans to introduce 25% tariffs on imports from Canada and Mexico, although the start of these has been delayed for a month.

The drinks firm said the taxes, which will particularly hit its tequila and Canadian whisky products, add “further complexity” to its ability to predict future trading.

According to bosses, around 45% of the group’s US sales are imported from Canada and Mexico.

Finance chief Nik Jhangiani said on Tuesday that it is currently expecting a roughly $200m (£161m) impact if tariff policies remain the same.

He told reporters that the firm has plans in place to mitigate around 40% of these, which could see the company increase its inventory in the US before the tariffs are introduced.

The FTSE 100 removed its medium-term guidance predicting organic net sales growth between 5% and 7%, blaming economic and political uncertainty amid tariffs.

It came as the London-based company revealed that net sales dipped by 0.6% to $10.9bn (£8.8bn) for the six months to December 31, as an increase in organic sales was dragged back by “unfavourable” currency exchange rates.

Reported operating profit declined 4.9% for the period.

In Great Britain, the group’s sales grew 2%, buoyed by soaring demand for Guinness, despite “temporary supply constraints” in recent months.

British pubs reported shortages of Guinness over the Christmas period as they were unable to secure enough of the beer to meet high demand.

Guinness sales growth offset weaker spirit sales in Britain, which were down by around 6% for the half-year.

Across Europe, spirit sales slipped 3% despite double-digit growth in tequila and a price inflation-driven rise for raki.

It said these were more than offset by lower demand for gin, vodka and rum.

Debra Crew, Diageo’s chief executive, said: “Our fiscal 2025 first-half results marked a return to growth, delivering organic net sales growth of 1% despite a challenging industry backdrop as consumers continue to navigate inflationary pressures.

“The confirmation at the weekend of the implementation of tariffs in the US, whilst anticipated, could very well impact this building momentum.

“We are taking a number of actions to mitigate the impact and disruption to our business that tariffs may cause, and we will also continue to engage with the US administration on the broader impact that this will have on everyone supporting the US hospitality industry, including consumers, employees, distributors, restaurants, bars and other retail outlets.”