*

CEOs must navigate changing trade policy

*

Diageo ( DEO ) says tariffs could dent profits by $200 mln

*

Auto parts supplier ZF expects to hike prices

*

Tariff spat could hurt global trade - DSV

By Emma Rumney, Yadarisa Shabong and Stine Jacobsen

Feb 4 (Reuters) - Diageo ( DEO ) 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 ( DEO ) 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.

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 ( DEO ) 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 ( DEO ), 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.

DAMPEN TRADE

Adding to the gloomy outlook, global freight company DSV

said on Tuesday duties threatened by Trump could curb

demand slightly, potentially denting its earnings this year.

The CEO of Finland's Nokian Tyres ( NKRKF ), Paolo Pompei,

said the tariff announcements were causing uncertainty and that

Nokian was creating a strategy to address them.

With Trump threatening to extend tariffs to the European

Union, EU Commission President Ursula von der Leyen said on

Tuesday the 27-country bloc will be ready for tough negotiations

to protect its own interests.

EU diplomats say Brussels has a range of possible responses

to any U.S. action, but will wait to see the U.S. president's

next move.

A broader, damaging trade conflict could reignite inflation

and damage the global economy, the International Chamber of

Commerce's global policy director Andrew Wilson said.

"A tariff at 5-10% in most supply chains or in many supply

chains can be absorbed in some way ... But 25%, it's almost

certain that some of that will be will be passed on," he told

Reuters.

"There are huge downside risks for the U.S. and for the

world if we get locked into a never-ending cycle of tariffs and

further retaliation."