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An Oklahoma City entrepreneur is turning to innovative financial strategies to keep his business afloat as rising tariffs on Chinese imports strain operations.
Robert Keeley, founder of Keeley Electronics, recently used over 1.8 million credit card points to help pay a growing tariff bill tied to essential components his company needs.
Keeley Electronics: A Homegrown Success Story
Keeley runs his effects pedal manufacturing business from a facility in Oklahoma City. The company, which employs 33 people, produces about 750 guitar pedals each week and reports annual sales of just over $5 million for the past four years.
“I’ve always been drawn to engineering and design,” said Keeley, who moved to Oklahoma in 1988 and has since made it home.
“The labor costs are reasonable, and it’s not like being on the coast where overheads spiral out of control.”
The Tariff Challenge: Potentiometers from China
A major challenge for Keeley’s business is the rising cost of importing potentiometers, a key electronic part used in his guitar pedals.
While he’s grown accustomed to a 25% tariff, rates temporarily surged past 100% earlier this year and currently sit at 55%, making it significantly harder to manage production expenses.
“Right now, we’re paying $8,000 to $10,000 a month just in tariffs,” Keeley noted. He explained that sourcing the part from countries other than China has proven unsuccessful, leaving him with few options.
Turning to Credit Card Rewards
To manage the financial burden, Keeley found a short-term solution: redeeming American Express Membership Rewards points.
“I had 2 million points, and I used 1.83 million of them to cover about $10,800 in tariff costs,” Keeley said. However, he acknowledged that this is not a sustainable long-term fix.
Impact on Innovation and Pricing
The high tariffs have forced Keeley to make difficult financial decisions, including delaying equipment purchases and holding off on expanding operations.
“These costs are like a tax on my business,” he said. “I love investing in new machines, but when profits are eaten up by tariff payments, it becomes nearly impossible to justify.”
Although Keeley is currently absorbing much of the cost, he admitted that if conditions don’t improve, price increases on his pedals may become inevitable.
Uncertainty Ahead
President Donald Trump’s trade policy includes a July 9 deadline, marking the end of a 90-day freeze on country-based tariffs, including those on China. Business owners like Keeley are watching closely, hoping trade negotiations result in relief.
“I’m doing what I can for now,” Keeley said. “But the future of pricing and innovation for my company really depends on how this tariff situation unfolds.”
As tariff rates on Chinese components continue to rise, small business owners like Robert Keeley are feeling the financial pressure.
While credit card rewards provided a temporary cushion, ongoing uncertainty could soon impact product pricing and investment in innovation.
Like many small manufacturers, Keeley is waiting to see if federal trade policy shifts will provide the breathing room his business needs to grow.