Sarge has been stabbed and he really didn't enjoy the experience, so when he sees her reach for the knife there is not a moment of hesitation before he moves out of the way, letting go of the brass knuckles in the process.
It does however help him with getting past his reluctance somewhat and he rounds on her, his hand slapping her ear hard, wrist loose to avoid injuring himself, to mess with her equilibrium. He has been trained properly to have a good grasp of techniques but has been in way too many bar fights to have any qualms about fighting dirty, girl or not.
She can wave that knife at him all she wants, it is not intimidating him at all. Quite the opposite, he finds it rather funny and he chuckles. "Ya really think that's gonna work. You got no idea what I'm capable of."