Business proprietor utilized credit card reward points worth 1.8 million to cover tariff expenses
In the face of escalating U.S. tariffs, small businesses like Keeley Electronics are feeling the financial strain. Based in Oklahoma City, Keeley Electronics manufactures and builds nearly every part of their guitar pedals in-house, from aluminium enclosures to circuit boards. However, the tariffs on parts shipped from China have led to ballooning costs for the company.
One of the key components for Keeley Electronics' pedals, a potentiometer, cannot be sourced from anywhere other than China. This has resulted in tariff costs surging since President Trump's second term in January, temporarily reaching over 100% in March. Keeley's team has tried to find a provider of potentiometers outside of China but have been unsuccessful so far.
Facing these challenges, small businesses like Keeley Electronics are adopting creative strategies to manage increased costs. Common approaches include diversifying suppliers, optimizing pricing, and investing in technology to control costs.
An unconventional but practical tactic that some small businesses, including Keeley Electronics, might employ is using credit card rewards points or cashback incentives earned through everyday business expenses to reduce net tariff-related costs. By channeling routine spending through credit cards with strong rewards programs, a business could accumulate points that cover shipping, procurement fees, or other supply chain expenses indirectly impacted by tariffs.
Robert Keeley, owner of Keeley Electronics, used 1.8 million reward points from his American Express card to cover tariff costs on his most recent bill, which totaled nearly $11,000. Keeley expressed a love for manufacturing and giving someone a job, and emphasized his dislike for depending on China for manufacturing his company's wares.
As of now, Keeley Electronics has not raised prices for customers to offset the higher costs, but may have to do so if stiff tariffs on Chinese imports remain in place. The 90-day freeze on country-based tariffs, including those in place on China, expires on July 9.
Keeley Electronics operates in a 17,000 square-foot warehouse in Oklahoma, where they manufacture pedals for electric and some acoustic guitars. Keeley emphasized his desire to make sure he is releasing exciting products that the world wants to buy.
Megan Cerullo, a New York-based reporter for our MoneyWatch, regularly covers small business, workplace, health care, consumer spending, and personal finance topics. She regularly appears on our News 24/7 to discuss her reporting. This article is based on her research and insights into the strategies small businesses are using to navigate tariff challenges.
- Amidst escalating U.S. tariffs, small businesses like Keeley Electronics are experiencing significant financial strain due to increased costs.
- One of the crucial components for Keeley Electronics' pedals, a potentiometer, can only be sourced from China, leading to soaring tariff costs.
- In response to these challenges, small businesses are adopting creative strategies such as diversifying suppliers, optimizing pricing, and investing in technology to control costs.
- As an unconventional yet practical tactic, some small businesses, including Keeley Electronics, are utilizing credit card rewards points or cashback incentives to help cover tariff-related costs.
