Recasts paragraphs 1-5, adds comments from CEO Mike Henry

By Roushni Nair and Melanie Burton

April 17 (Reuters) - BHP Group BHP.AX said that an escalating trade war could harm the world economy and adaptation was key to sustaining global growth, as it reported a slight decline in iron ore production in the third quarter on Thursday.

The direct impact on BHP of the tariffs unleashed by U.S. President Donald Trump this month was limited, the mining giant said.

Trump has since postponed some of the duties, but has increased levies on China even further. Tariffs apply to steel from China where BHP sells most of its major product, iron ore.

"China's ability to shift toward a consumption-led economy and for trade flows to adapt to the new environment will be key to sustaining the global outlook," CEO Mike Henry said in a statement.

The comments came as the world's biggest listed miner reported a slightly lower third-quarter iron ore output and flagged higher production of copper, which is also subject to a tariff probe by the U.S.

BHP said the dip in quarterly iron ore production was due to cyclones, while it forecast 2025 Chilean copper production in the upper half of its guidance range as part of a ramp-up at its Escondida mine.

The world's largest listed miner was forced to temporarily halt operations at Port Hedland, the world's largest iron ore export hub, after Cyclone Zelia struck Western Australia's Pilbara region in February, following earlier disruptions from Cyclone Sean in January.

Despite the bad weather, BHP hit record nine-month output from its Pilbara operations, where the South Flank and Mining Area C sites benefited from the completed ramp-up of South Flank last year and a 13% boost in mining activity.

Shares of the company rose 0.6% to A$36.2, as of 0027 GMT, largely in line with a 1% jump in the broader mining sub-index .AXMM.

Copper production rose 10% to 513,200 metric tons in the quarter, bolstered by a 20% jump in volumes at the Escondida mine in Chile due to improved operational performance.

The company said it expects to meet its fiscal 2025 unit cost targets across all operations except at its BMA coal joint venture, where adverse weather and geological issues at the Broadmeadow mine are expected to increase costs.

BHP has been leveraging revenue from its iron ore business, which still generates over half its earnings, to expand copper and potash potash projects, as it positions for growth from the energy transition.

Iron ore production from the global miner's Western Australia operations eased to 67.8 million tons in the quarter ended March 31, from 68.1 million tons a year earlier, in line with Visible Alpha consensus view of 68.03 million tons.

(Reporting by Roushni Nair and Roshan Thomas in Bengaluru, Melanie Burton in Sydney; Editing by Maju Samuel, Rashmi Aich and Kate Mayberry)

((Roshan.Thomas@thomsonreuters.com, roushni.nair@thomsonreuters.com;))