Drinks giant Diageo has warned that it expects US trade tariffs to cost the company around 150 million US dollars (£113 million) each year as it launched a major cost-cutting plan.

The Guinness and Johnnie Walker maker said it would be impacted by a 10% tariff on UK and European imports into the US, after President Donald Trump launched a raft of tariffs last month.

It said it believes its current plans will mitigate around half of the impact of these higher costs on its profit and it will work on further measures to offset the impact.

However, it reflects an improving outlook after Diageo said in February that it was bracing for a 200 million US dollar (£161 million) hit to profits from tariffs.Diageo owns brands including Gordon’s, Baileys and Johnnie Waler (Diageo/PA)

The firm was set to face a significant knock from proposed tariffs on US imports from Canada and Mexico, but was buoyed by an exemption on alcoholic drinks in March.

Diageo also stressed on Monday that it will not be affected by tariffs between the US and China.

It came as the company launched a 500 million dollar (£375.6 million) cost-saving programme, in order to support further investment and improving its leverage.

The London-listed firm, which also makes Gordon’s gin and Baileys, said it will shift to “a more agile global operating model” as it seeks to improve its cash flow.

Diageo employs around 30,000 people but did not comment on whether jobs would be impacted by cost cuts.

Meanwhile, the company reported that net sales grew by 2.9% to 4.37 billion dollars (£3.28 billion) for the three months to March 31, amid a boost from continued strong Guinness sales.

In Europe, sales dipped 1.3% for the quarter as higher Guinness sales were offset “further softness” in spirits across key markets.

Organic spirit sales were weaker year-on-year in the region, despite increased demand for tequila.

However, sales in North America grew by 5.9% amid strong shipments of US spirits.

Debra Crew, chief executive of Diageo, said: “In the third quarter we delivered strong organic net sales growth and are on track to deliver on our guidance of sequential improvement in organic net sales performance in the second half of fiscal 2025.

“We also reiterated our organic operating profit outlook for fiscal 2025, including the impact of tariffs based on what we know at this time.

“We continue to believe in the attractive long-term fundamentals of our industry and in our ability to outperform the market.

“We view the near-term industry pressure as largely macro-economic driven, with continued uncertainty impacting both the timing and pace of recovery.”

AJ Bell investment director Russ Mould said: “Investors were braced for a bad quarter from Diageo yet the drinks giant has managed to pull a rabbit out of the hat.

“Sales were driven by a mixture of volume and prices, with Diageo benefiting from wholesalers stocking up ahead of tariffs.”

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