Reviving American Manufacturing: How Tariffs and Local Sourcing Fuel Growth for Small Businesses

In Prescott, Arizona, the phrase “Made in America” resonates deeply for many, symbolizing not just a product’s origin but a collective pride in national craftsmanship. John Roy, the CEO of Dawson Knives, embodies this sentiment. His company, founded over five decades ago by a Vietnam veteran with makeshift machinery salvaged from a local landfill, stands as a testament to the resilience and ingenuity of American manufacturing. With a legacy now spanning three generations, Dawson Knives illustrates how domestic companies can flourish, even in the face of economic challenges.

Roy’s confidence in the American market is bolstered by recent data from the Department of Commerce, revealing that nearly half of the goods purchased by Americans in 2023 were labeled as “made in America.” However, it’s important to note that this designation sometimes includes products that are merely assembled in the U.S. from imported components. Nevertheless, with total gross domestic purchases reaching a staggering $3.7 trillion, Roy believes the potential for domestic products is immense. “When you keep it domestic and your dollars here [in America], it pays off,” he asserts, embodying a spirit that many American consumers are beginning to embrace more fervently.

The economic landscape shifted dramatically after the Trump administration implemented sweeping import tariffs in April 2018. Many predicted doom for domestic manufacturers, yet Roy found the opposite to be true. Dawson Knives experienced a surge in sales, increasing from $11,000 to $15,000 per day shortly after the tariffs were announced. Projecting into the future, he anticipates doubling orders from 4,000 to 8,000 by 2025. His diverse product line, which includes hunting, survival, culinary, and heirloom knives, caters to a broad audience, further solidifying the company’s foothold in the market.

Roy’s strategy to weather potential global trade turmoil centers on sourcing materials domestically. He emphasizes the importance of efficiency in production, stating, “In order to have that efficiency, we have to really invest in computers … everything to help us down the line to make better models, better manufacturing, and reduce steps.” This investment in technology not only streamlines operations but also positions Dawson Knives favorably against imported alternatives.

Nonetheless, challenges persist. The closure of a longtime steel supplier due to regulatory restrictions on coal highlights how government policy can impact even the most established businesses. Yet Roy remains optimistic, having secured a new U.S.-based steel supplier to fill the gap. He views the potential for higher costs of raw materials domestically as a lesser evil compared to the complications that come with international shipping and import tariffs. The steel inventory he currently possesses, combined with a steady domestic supply chain, gives him a buffer against immediate disruptions, allowing him to focus on meeting rising demand.

While Dawson Knives thrives, other businesses face their own hurdles. Take, for example, Jay Levine, owner of the San Francisco Chocolate Factory in Phoenix. With over 28 years of experience, Levine’s company remains largely insulated from tariff impacts due to its commitment to sourcing ingredients domestically. “Everything I buy is local [or it] comes from the United States,” he explains. However, even he has felt the pinch of rising costs, particularly for high-quality chocolate from Belgium, which is now subject to a 10% import duty. Despite these challenges, Levine believes in the resilience of the chocolate market: “This is an indulgence. People will pay extra for it.”

On the apparel front, Tyler Windes, president of Don’t Tread On Me, faces a different kind of challenge. While his company produces American-made shirts and hoodies, sourcing domestic options for hats has proven difficult. Windes recognizes the need for increased investment in American textile production, which could alleviate sourcing challenges for companies like his. “We’ve begun to see some U.S. clothing manufacturers returning to American-grown cotton, which is a reassuring sign of what’s to come,” he notes.

While the optimism of these business leaders paints a hopeful picture for the “Made in America” movement, the broader context of U.S. manufacturing tells a more complex story. Since 2010, the United States has lost its status as the world leader in manufacturing, now producing $2.4 trillion less than China. The Bureau of Labor Statistics reports a staggering decline in manufacturing jobs, from 19.6 million in 1979 to just 12.8 million by 2019—a 35% drop. This shift has left many American manufacturers grappling with the dual challenges of rising costs and a shrinking workforce.

As businesses adapt to new tariffs and economic realities, innovative solutions are emerging. For instance, SKU Distribution in Chandler, Arizona, recently gained a federal foreign trade zone (FTZ) designation, allowing companies to defer import duties. Founder and CEO James Peacock notes that amid rising costs, businesses are in “panic” over cash-flow issues. The FTZ designation provides a buffer, allowing manufacturers to store products without immediate tariff payments, thus enabling them to strategize their responses to the changing economic landscape.

Yet, amidst these challenges, the overarching concern remains the search for qualified employees. As industries become increasingly complex and technology-driven, finding skilled labor is becoming more critical than ever. Roy emphasizes the intricate processes involved in knife-making, from sourcing high-quality materials to precision machining. “Creating a Dawson knife is no simple task,” he states, underscoring the need for a skilled workforce to maintain quality and craftsmanship.

In conclusion, while the “Made in America” movement faces obstacles, it also reveals a resilient spirit among American manufacturers. From the knife-makers in Prescott to chocolatiers in Phoenix, these businesses are navigating a rapidly changing landscape with ingenuity and determination. As they adapt to tariffs and shifts in consumer demand, the commitment to American craftsmanship remains a powerful force—one that continues to inspire pride in the products we create and consume.