- A hit to ports along the US East and Gulf Coast poses major challenges for the economy.
- The strike could lead to billions in daily economic losses and hamper imports ranging from mangoes to auto parts.
- Port workers are pushing for higher wages and a ban on automation at ports.
A major strike at US ports began Tuesday and could disrupt everything from holiday shopping to auto production lines.
Workers represented by the International Longshoremen’s Association went on strike on Tuesday over the terms of a new contract, with unions demanding higher wages and a ban on automation at ports. The union called the strike after negotiations with the United States Maritime Alliance, a group that represents employers of workers, failed to produce a contract agreement.
The consequences of the strike on the economy will depend on how long it lasts. But the effects are potentially massive and far-reaching: The strike is affecting 36 ports from Maine to Texas, which normally move everything from fresh fruit to tires.
Here’s a rundown of all the ways the attack could affect the US.
The strike could cost the US economy billions a day
Economic losses from the strike could cost the US economy between $3.8 billion and $4.5 billion a day, according to analysts at JPMorgan.
If the strike lasts more than two weeks, it could push inflation higher and lead to product shortages, Stifel analyst Bruce Chan said on Tuesday.
Shipping container companies including ZIM Integrated Shipping Services and Costamare saw their share prices fall on Tuesday. Meanwhile, shares of FedEx and UPS have risen over the past week. Both companies offer air freight services that can become valuable, if expensive, alternatives to sea freight.
The strike could even trigger a U.S. recession if it lasts more than a month, said Alan Murphy, CEO of liner research firm Sea-Intelligence.
The flow of consumer goods may come to a halt just before the holiday shopping season
Fresh fruit, beer, wine and other imported groceries typically move through ports on their way to buyers at chain and big-box grocery stores.
But the strike could halt shipments of these foods, including mangoes, bananas and other fresh fruit from Central and South America.
The strike also comes at a difficult time for retailers preparing for the holiday shopping season. Toy brands Lego and Playmobil typically rely on East Coast ports to bring products into the U.S., according to Jefferies analysts. Furniture, tires and other durable goods can also be left sitting on the ship, BI reported.
Retailers have prepared for the strike by diverting some shipments to ports on the West Coast and bringing in products earlier, Jonathan Gold, the National Retail Federation’s vice president for supply chain and customs policy, told BI.
However, “even a small disruption would have a negative impact and cause delays at a critical time for both retailers and consumers,” he added.
Auto parts and other manufacturing inputs can land at ports, delaying domestic production
U.S. factories could also see their production lines slowed if the strike prevents them from getting foreign participation.
Domestic car and pharmaceutical manufacturers could be among those hit, Mia Ginter, director of ocean export products at shipping company CH Robinson, wrote in August about a possible strike.
The strike is already a major issue for President Joe Biden
Trade groups representing major American companies called on Biden to step in and prevent a strike in the days before the departure.
On Tuesday, for example, the National Retail Federation said Biden should “use every authority and means available” to resume normal operations at the ports, including invoking the Taft-Hartley Act, which allows the president to intervene during labor disputes affecting national security.
Meanwhile, labor leaders have asked Biden to stay out of the negotiations, with Teamsters General President Sean M. O’Brien siding with the dockworkers, telling Biden to “stay out of this fight and let union workers keep their jobs for the wages and benefits they’ve earned.”
Biden indicated on Monday before the strike that he would not intervene.
“It’s collective bargaining. I don’t believe in Taft-Hartley,” he said.
The White House has said it is in contact with the International Longshoremen’s Association and the United States Maritime Alliance to encourage a quick resolution.