Will port strike severely disrupt US economy?

The International Longshoremen’s Association (ILA) has commenced a strike that affects dozens of ports along the US east coast and Gulf of Mexico. Beginning at 12:01 a.m. (ET) on 1 October 2024, approximately 25,000 workers walked off the job at 36 ports, stretching from Maine to Texas. This action has the potential to significantly impact the US economy, particularly if the strike is prolonged.

The ports involved handle around 50% of the nation’s cargo, making this strike a critical issue. Economists warn that an extended work stoppage could sharply increase consumer prices and cause shortages, especially with the holiday season approaching.

Impact on consumers

Although retailers have stocked up in anticipation of this disruption, a prolonged strike could strain the supply chain, leading to delayed deliveries and increased costs for businesses and consumers alike.

Delays would affect deliveries of essential goods such as toys, vehicles, coffee, and fresh produce, leading to shortages and price hikes. The impact could spread to raw materials such as cotton, copper, and plywood, affecting manufacturing sectors. Additionally, perishable goods like bananas and fresh meat could spoil, causing further disruptions in grocery supplies.

Many businesses have taken steps to mitigate the impact of the strike by stockpiling goods, but perishable items are particularly vulnerable to immediate shortages.

Impact on ports

Furthermore, exports from the east coast could be severely delayed, and the increased demand at west coast ports—where workers are represented by a different union—could create bottlenecks there as well.

While railroads may increase their capacity to transport goods from the west coast, it is believed they won’t be able to fully compensate for the closure of eastern ports.

“Long Beach and Los Angeles ports are already experiencing the impacts of the ILA strike, reporting an 18% increase in volume last month,” a supply chain intelligence platform FourKites noted.

According to Sea-Intelligence, US east coast handling volumes stand at 2.3m TEU in October, based on historical estimates, which translates into 74,000 TEU per day, split 36,000 on imports and 38,000 on exports. For empties alone, a strike would mean the inability to load 20,000 TEU each day.

“It would take 6 days to clear the backlog from 1 day of strike, meaning a 1-week strike in the beginning of October, would not be cleared until mid-November. If we get a 2-week strike, then realistically, the ports would not be back to normal operations until we are into 2025,” Alan Murphy, CEO, Sea-Intelligence, said in mid-August.

Read more: East Coast strike’s duration key to impact; two-week disruption could push recovery into 2025

Billions per day

J.P. Morgan estimates that the daily cost to the economy could range from US$3.8 billion to US$4.5 billion if the strike continues, although some of that loss could be recovered once normal operations resume.

“The strike will have impacts on supply chains, leading to delays in cargo movement, increased costs, and logistical challenges for businesses relying on US east coast and gulf ports,” Maersk said in an advisory published on the company’s website. “Longer labour dispute durations may exacerbate disruptions, affecting import and export activities, container availability, and overall operational efficiency.”

The National Retail Federation expressed concerns that many of the goods expected to arrive around the beginning of October, such as holiday restocks and just-in-time items like auto parts and pharmaceuticals, could be affected.

Despite the strike, cruise operations and military activities at the ports will continue as usual.

Political dimension

The timing of the strike, just weeks before the presidential election, adds a political dimension to the issue. Shortages of goods could become a key factor in the election.

Retailers, auto parts suppliers, and produce importers had hoped for a swift resolution or intervention by President Joe Biden, possibly invoking the Taft-Hartley Act to impose an 80-day cooling-off period. However, when asked by reporters, Biden made it clear that he does not plan to intervene.

In response to the strike, New York Governor Kathy Hochul assured the public that her administration is working diligently to ensure that essential products, including groceries and medical supplies, continue to reach their destinations. She urged the United States Maritime Alliance (USMX) and the ILA to reach a fair agreement quickly, emphasising the need to respect workers’ rights while ensuring that the flow of goods is not severely disrupted.

Governor Hochul also advised consumers against stockpiling goods, stating that New York does not expect any shortages of essential items soon.