It's all about the tariffs.

The company said it was able to mitigate about half the effect of the previous, lower levies from the Trump administration.

These 10 stocks could mint the next wave of millionaires ›

Over the past few months, the stop-and-start tariffs imposed by President Donald Trump have rocked the market. For any company that imports into the U.S., naturally, tariffs are a particular worry.

The potential effects on such companies could be a canary in a coal mine for other importers. That's why keeping an eye on a company like Diageo (NYSE: DEO) is a good idea.

Diageo might not be a familiar brand name on its own, but it's got some awfully familiar brands in its portfolio. Some of the alcoholic beverages it owns might be in your liquor cabinet right now. Its more than 200 libations include Guinness beer, Smirnoff vodka, and Bailey's Irish Cream liqueur.

The U.S. is Diageo's largest single market. The company has sensibly built a U.S. presence, with 12 production sites cranking out the drinks that please customers.

Yet much of Diageo's production originates in Europe, so the company is a big importer into the U.S., and thus subject to Trump's tariff regime, with the rate recently raised from 10% to 15%.

Even at the lower rate, the tariff regime was affecting Diageo. In its second-quarter earnings update, the company estimated that tariffs would take $150 million in annual costs.

That's something of a drop in the bottle for a business with yearly sales over $16 billion, and headline net profit that lands north of $3 billion.

Still, $150 million is a lot of scratch for any business, regardless of its size. In that update, Diageo wrote that unspecified measures it took before the 10% tariff was levied helped mitigate about half of the effect on operating profit. We'll see where that lands the bottom line in coming quarters.

Diageo is signaling that tariffs are a wet blanket, even for the largest of importers. Investors should watch how this busy liquor shipper deals with increased rates, and it may give them some insight on how other companies will handle the situation.

The Motley Fool’s analysts are tracking a massive shift in U.S. tech. Over $1.5 trillion is already flowing into infrastructure, AI, and advanced manufacturing… and the number keeps climbing.

Following a major tariff policy shift, a new AI Gold Rush is taking shape, and we think the real winner is a company 1/100th the size of NVIDIA.

It builds the tech infrastructure that Apple, OpenAI, and others suddenly can’t live without. We just released a full write-up on this under-the-radar stock — and why now might be the exact moment to move.

Continue »

*Stock Advisor returns as of August 4, 2025

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Diageo Plc. The Motley Fool has a disclosure policy.

1 Reason to Watch Diageo Stock in 2025 was originally published by The Motley Fool