OK guitar pedal business owner spends 1.8 million credit card points to pay for tariff bill

OKLAHOMA CITY (KFOR) – The owner of an Oklahoma business that makes guitar effects pedals says he's had to get creative to offset costs triggered by an increased tariff rate on China by the United States.

Robert Keeley runs Keeley Electronics out of an Oklahoma City manufacturing building. Keeley says his business employs a little over 30 people and produces roughly 750 pedals a week.

"We've got 33 employees and our annual sales for the past four years have been a little over $5 million," said Keeley. "So, it's a small business."

Keeley said he's always had a fascination with engineering and has poured that into his company for the past two decades. He says he moved to Oklahoma in 1988 and has grown to love it.

"The labor rate is very reasonable, too," said Keeley. "It's not, it's not a coastal city, and so I can, my labor is not out of control either."

Keeley said that his business has been struggling with recently are tariffs on a key part he needs to make his pedals, called a potentiometer. He says he's spent the past several weeks trying to find the product outside of China but hasn't had any luck. Keeley said he's no stranger to a minimum 25% tariff on goods from China in recent years, but tariff rates temporarily shot up more than 100% in March, and are now at 55% to buy his potentiometers.

"The tariffs were put down to 55%, which is manageable, but it's now you're talking about, you know, the financial concerns," said Keeley. "I'm spending about now may be it was $8,000 to $10,000 a month on tariffs."

Keeley said he found one temporary solution to the problem by redeeming millions of reward points tied to his American Express card.

"I had 2 million points and I spent 1.83 million, and it got me about $10,800 worth of tariffs paid," said Keeley.

He said it's not a method of paying that's sustainable in the long term, and he's hoping tariff rates improve.

"At some point in time, yeah, in the very near future, it's definitely going to be reflected in my pricing," said Keeley.

Keeley said he hopes to keep pricing the same on his pedals for as long as he can before that happens, but with uncertainty surrounding how long tariff rates will remain higher than he's used to, he's been eating a lot of the costs.

"Any of these things are kind of a tax on my bottom line," said Keeley. "I wasn't able, I'm not able to buy new machines. I love buying machines to build new things, and it makes it a little bit more difficult for me to consider buying new machines if my profit level is kind of zeroed out because of high tariffs."

President Donald Trump has set a July 9 deadline before a 90-day freeze on country-based tariffs, of which China is included, ends. Keeley is hoping negotiations will be successful in giving his business a more positive chance to bounce back from financial strains.