Disruption looms at East Coast ports as longshoremen prepare to strike

Thousands of longshoremen at ports from New England to Texas are set to strike early Tuesday in the first walkout of its kind in almost half a century, freezing commercial shipping on a massive scale and disrupting the national economy weeks before the presidential election.

A strike would be the biggest disruption to the flow of goods in and out of the country since the height of the pandemic. Even a short-lived work stoppage would snarl shipping and create havoc in supply chains for weeks. Cargo ranging from cars to electronics, from food to furniture, would be stuck on ships offshore. Each day a strike lasts could cost the U.S. economy up to $1 billion, according to analysts.

Beginning five weeks before the election, a strike could also inject new uncertainty into the presidential campaign. Fearful of the impacts, business groups and congressional Republicans have lined up to press the White House to invoke emergency powers and seek to block a strike, although President Joe Biden’s administration has not shown a willingness to intervene.

Vice President Kamala Harris, the Democratic presidential nominee, and Donald Trump, the Republican nominee, have not weighed in on the potential strike, but the port shutdowns would begin the same day as Tuesday night’s televised vice presidential debate.

Talks between the International Longshoremen’s Association, which has 47,000 members, and the U.S. Maritime Alliance, representing container carriers and port operators, have been all but stalled since the summer. The current labor contract expires Monday night, freeing the union to strike Tuesday as early as 12:01 a.m. as it presses for substantial raises and stronger guarantees that automated systems will not be used to replace workers.

Longshoremen are responsible for loading and unloading cargo at ports. The job includes working the cranes that haul containers on and off huge cargo ships as well as maintaining equipment.

The impact would be concentrated on shipping containers, as well as the movement of new cars and trucks. Several dozen ports are expected to close to container shipments, including the major maritime hubs of New York, Baltimore, Norfolk, Savannah and Houston.

Longshoremen on the West Coast are represented by a separate union that agreed to a contract last year. Ports in California and the Pacific Northwest would not be directly affected by a strike. But workers there, in solidarity, could refuse to handle cargo diverted from the East Coast.

During a strike, the East Coast union said it would continue to move military cargo and handle cruise ships, so as to not affect people’s vacations. Ships carrying oil and gas are served by dedicated facilities with crews who would not be on strike; gasoline and fuel oil prices are not expected to be affected.

The last ILA strike, a 45-day walkout in 1977, occurred before the rise of the modern globalized economy, said Margaret Kidd, program director of supply chain and logistics technology at the University of Houston. Trade accounted for just 16% of the U.S. economy then, far below the current 27%, according to the World Bank. The affected ports account for a little more than half the nation’s trade in shipping containers.

“A strike like this where half the country is closed down, American consumers will pay,” Kidd said. “If it goes on for a long period of time, folks will be unemployed. This is not one sector. This is the U.S. economy.”

But the longshoremen’s union says the stakes for its members are just as high, arguing that workers deserve their fair share of the hundreds of billions in profits made by the shipping industry after having stayed on the job even as the coronavirus spread.

Scott Cowan, a Baltimore-based union vice president, was a toddler when his father took part in the last strike. Work at the port has supported his family for decades, Cowan said, and the union is seeking to ensure it supports the families of future generations.

“Robots don’t pay taxes,” Cowan said. “Robots don’t put food on your table.”

The sides have not disclosed the union’s demands. Negotiations foundered in June, when the union accused a port in Alabama of using an automated gate in violation of the contract. On Wednesday, the maritime alliance, known as USMX, filed a complaint with the National Labor Relations Board, seeking an order that the union return to the bargaining table.

“USMX has been clear that we value the work of the ILA and have great respect for its members,” the alliance said in a statement. “We have a shared history of working together and are committed to bargaining.”

The union’s president, Harold Daggett, a third-generation member from New Jersey, has been turning up the rhetoric for months. That has given importers time to prepare for the strike, with the biggest companies moving shipments earlier in the summer than normal as they prepared for holiday shipping, while other shipments were diverted to the West Coast. But analysts said those measures would only do so much to blunt the impact of a strike.

“It’s potentially the craziest thing I’ve seen in North America for some time, apart from covid,” said Mia Ginter, the director of ocean exports for North America at the logistics firm C.H. Robinson.

Still, the economic hit is not expected to be crippling unless the strike is a long one. For every week the ports are idle, the economy’s annual growth rate would lose one-tenth of a percentage point. Instead of growing at, say, 2.5% this year, the economy would grow at a 2.4% rate if the strike lasted a week, according to Greg Daco, chief economist for Ernst & Young.

A work stoppage could slow progress on bringing inflation under control, though not enough to affect the Federal Reserve’s plans for future interest rate cuts, he added.

“It’s a significant shock in dollar terms. But it’s not going to bring the economy to its knees or cause a recession,” Daco said. “It’s just not large enough.”

Higher inventories will act as a buffer against product shortages in some parts of the economy. Retailers and wholesalers have been rebuilding their stockpiles since reaching a recent low in mid-2021, according to U.S. Census Bureau data.

In July, West Coast import volumes from China were up more than 30% from the same month in 2023, more than twice the percentage increase in the previous three months, according to S&P Global Market Intelligence.

Seko Logistics, a freight forwarder, shifted some client cargoes to West Coast ports that would be unaffected by the union action.

“Like a lot of companies, we’ve been preparing for this eventuality,” said Brian Bourke, Seko’s global chief commercial officer in Chicago. “Everyone knew it was going to be an issue. Everyone had months and months and months to react.”

Yet as of Thursday, 42 container ships were scheduled to arrive at the Port of New York and New Jersey in the next several days, according to Container xChange, an online marketplace for shipping containers that is headquartered in Germany. Importers that have not already implemented contingency plans risk having their shipments trapped at sea or on the docks. Small traders, in particular, are vulnerable to escalating costs and container shortages.

“The strike could push the container trade into chaos,” said Christian Roeloffs, Container xChange’s chief executive.

Daggett, who has served as president since 2011, leads the union representing port workers from Maine to Texas with his son Dennis, the union’s executive vice president. They have released fiery statements and videos in recent weeks underscoring their willingness to fight and invoking epic labor battles from decades past. The union’s constitution gives its president the exclusive power to determine whether to strike.

Longshoremen’s annual pay varies widely, but the current top rate is $39 an hour. Data from a 2020 report on longshoremen in New Jersey and New York showed the median annual pay was around $160,000, but ranged from less than $25,000 to over $450,000. Workers receive an additional bonus funded by a fee on containers.

Their last contract, negotiated in 2018, included raises that have not kept pace with inflation. Harold Daggett has accused the maritime alliance of continuing to try to “low-ball” workers.

“My ILA members are not going to accept these insulting offers that are a joke considering the work my ILA longshore workers perform, and the billion dollar profits the companies make off the backs of their labor,” Daggett said in a statement.

Given the union’s unwillingness to talk, analysts say they expect the federal government would ultimately have to take a hand in resolving the dispute.

Acting labor secretary Julie Su, who helped resolve a dispute affecting West Coast ports last year, along with officials at the White House and Transportation Department have been in touch with both sides. An administration official said their message to both sides has been to get together and negotiate in good faith.

The government has the authority to go further, invoking powers under a 1947 law known as Taft-Hartley to try to force strikers back to work and to continue negotiating. But for the Biden administration, which touts itself as the most pro-union ever, that could be a difficult step to take.

“We’ve never invoked Taft-Hartley to break a strike and are not considering doing so now,” the administration official said in a statement.

The National Retail Federation sent Biden a letter signed by 177 trade groups representing importers, manufacturers and farmers, saying a strike would be “devastating” and urging officials to be “ready to step in if a strike or other action occurs that leads to a coastwide shutdown or disruption.”

Republicans in Congress have also tried to put pressure on the Biden administration to step in.

“As usual, the Biden-Harris administration seems to have been caught unaware of the potential for a strike and has shown no leadership in bringing the parties together to negotiate a deal and prevent a strike,” Sen. Ted Cruz (R-Tex.) said during a hearing Wednesday.