As the US-China trade tensions escalate, a small Minnesota town has become a global player in the electronics industry. DigiKey, one of the world’s largest marketplaces for electronic components, is navigating the treacherous landscape of tariffs and trade agreements.
A small U.S. town grew a big company. Can it weather the tariff blizzard?
DigiKey, one of the world’s largest marketplaces for electronic components, has become a household name in Thief River Falls, Minnesota. The company’s humble beginnings date back to 1972 when Ron Stordahl sold an invention called a ‘Digi-Keyer’ for transmitting Morse code. Initially, DigiKey focused on selling small quantities of electronic parts to engineers and hobbyists through mail-order catalogs and online platforms.
Over time, DigiKey expanded its operations, and the town of Thief River Falls transformed into a thriving hub for the tech giant. The company’s warehouse now sprawls under the vast northern sky, employing half the county’s workforce with 3,800 U.S. jobs. DigiKey ships an average of 25,000 orders daily, domestically and abroad.
However, the rise to prominence has come at a cost. The company is deeply entangled in the complex web of tariffs, trade agreements, and regulations that have become increasingly volatile under President Trump‘s administration. As a result, DigiKey finds itself struggling to navigate this treacherous landscape.
Tariffs are taxes imposed by a country on imported goods.
They can range from a few percent to several hundred percent of the product's value.
The primary purpose of tariffs is to protect domestic industries and generate revenue for governments.
However, they can also lead to higher prices for consumers and retaliatory measures from other countries.
According to the World Trade Organization (WTO), tariffs account for approximately 2-3% of global trade.
In recent years, tariffs have been a contentious issue in international trade agreements, with many countries imposing tariffs on imports from other nations.
The Tariff Conundrum
DigiKey’s reliance on imported components from countries like China poses significant challenges. The company has spent half a billion dollars on tariffs since 2018 and is still grappling with the consequences of these levies. The situation has become increasingly complex, with multiple tariffs imposed in quick succession, making it difficult for DigiKey to keep up.
Digi-Key Corporation is a leading global distributor of electronic components, offering over 12 million products from more than 1,500 suppliers.
Forrest M. Bird founded the company in 1959.
The company has grown to become one of the largest and most respected electronic component distributors worldwide.
Digi-Key's extensive product range includes semiconductors, passive and interconnect products, sensors, and much more.
The company operates a robust e-commerce platform, providing customers with streamlined ordering and delivery options.
The company’s vice president of operational excellence and trade compliance, Teri Ivaniszyn, has been at the forefront of addressing this issue. She has hand-sketched a spreadsheet of tariff changes, one column wedged in on a hurried slant, reflecting the chaos that has engulfed her team. The online team has built a toggle for the website that lets shoppers see only nontariffed options, while customer service reps are trained to answer tariff-related questions.
The impact is not limited to DigiKey‘s operations. Thousands of orders that used to auto-flow directly to the warehouse floor for same-day shipping now often miscalculate tariff costs, leading to system breakdowns and phone calls and emails ensue.
A Delicate Balance
DigiKey faces an existential dilemma: Any bigwig consulting firm would likely tell DigiKey to open warehouses in Europe and Asia to bypass the United States. However, this option is not without its challenges. The company’s president, Dave Doherty, says that opening new warehouses would require a significant investment of time and money.
‘We’re the lifeblood of northwest Minnesota,’ he notes. ‘We’re not going to abandon our community.’
The town of Thief River Falls has become deeply intertwined with DigiKey’s operations, with many residents having family members employed by the company. The mayor, Mike Lorenson, an IT manager at DigiKey, highlights the importance of this relationship.
‘If you’re not working here, your family member is working here,’ he says.
Weathering the Storm
As the tariff storm continues to rage, northern Minnesotans seem better equipped to weather it than their counterparts in other parts of the country. The region’s experience with blizzards and harsh winters has taught residents a valuable lesson: adaptability and resilience are key to survival.
‘We’re in blizzard-like conditions,’ says Tom Wichert, a supplier visiting from New Jersey. ‘The winner of the game is the one who can manage through the conditions the best.’
As DigiKey navigates this complex landscape, it remains to be seen whether the company will emerge stronger and more resilient than ever. One thing is certain: the fate of Thief River Falls and its residents hangs in the balance, as they strive to weather the tariff storm that has become an integral part of their lives.
