East Coast port strike imminent as longshoremen talks show no progress

Ports from New England to Texas are on the brink of shutting down as longshoremen prepare to go on strike over demands for higher pay and job protections early Tuesday, a work stoppage that will bring trade to a halt along the coast and send ripples through the broader economy.

A prolonged strike, anticipated at three dozen ports, could lead to shortages in retail stores and price increases, and even a short one would snarl the supply chains that link the United States to the rest of the world. With no signs of progress between the International Longshoremen’s Association and an alliance representing ports and shippers, business have been preparing for months in case of a strike. But analysts say the economic impact of a shutdown will be impossible to avoid.

The effects of a strike are not expected to be as severe as the disruptions to trade during the pandemic, but could rekindle worries about shortages in stores and inflation just weeks from a presidential election in which the economy has been a key issue.

The White House has urged the two sides to continue bargaining in good faith, and says a supply chain task force is ready to help minimize the impacts. But officials have consistently said President Joe Biden does not plan to use his legal powers to try to force the parties to talk and end a strike, strengthening the union’s position.

A walkout would demonstrate the outsize role played by ports in the economy and the potential for disruptions to spread far from the coast, said Pawan Joshi, an executive vice president at supply chain management platform E2open.

“One small disruption there causes a lot of changes across the board,” Joshi said. “There’s a domino effect. We think of this as just a port strike, but it has a lot of implications.”

In a statement Sunday, the union affirmed plans to strike, saying that the United States Maritime Alliance, which represents managers, “refuses to address a half-century of wage subjugation.”

A strike along the entire coast would be the first of its kind in almost 50 years, when trade was a much smaller portion of the total economy. The affected three dozen ports account for more than half of the nation’s trade in shipping containers and handle large volumes of vehicle imports.

The threat of a strike comes just as the holiday shopping season kicks off, and while big-box retailers have already stocked up in anticipation of a disruption at the ports, small- and medium-sized businesses will bear the brunt, said Patrick Penfield, a professor of supply chain practice at Syracuse University.

“They don’t have the ability to stock as much inventory as big retailers do,” he said. The longer the strike goes on, the more they’ll be impacted, Penfield added.

The disadvantage will continue even after the strike, as bigger retailers tend to get priority to unload their inventory because they have larger orders. The strike will also force some retailers to change how they transport their goods and will likely cause prices to go up. Many will turn to shipping via airplanes, Joshi said, a faster alternative that is more expensive – and causes more emissions – than sending freight by sea.

With a potential strike hours away, port managers are set to begin putting shutdown plans in place after keeping terminals open extra hours in recent days. The Port of New York and New Jersey, the biggest of the affected ports, warned of heavy congestion nonetheless despite the extra working time.

“There will be no opportunities to deliver any cargo once a strike begins,” Bethann Rooney, the port’s director, said in an advisory last week. “This is particularly important for all refrigerated containers and any hazardous materials.”

Workers at Ace Logistics in Baltimore have moved enough containers from the docks to their eight warehouses and six outdoor storage yards to stay busy unloading through a one-week strike, said Alec Hajimihalis, co-owner. Ace plans to absorb about $100,000 per day in costs associated with the extra work.

“We’ll do whatever we can to keep our clients from running out of products,” he said.

Paul Brashier, global supply chain vice president at ITS Logistics, said this strike has potential to be more far-reaching than disruptions during separate West Coast labor negotiations last year. In that case, fewer ports were involved and supply chains had already shifted away from the coast, in some cases, during the pandemic.

“It’s touching everything from consumer goods to durable goods to infrastructure,” Brashier said. “There’s no industry really that’ll be spared.”

He compared it to ports preparing for an incoming hurricane – workers are pulling as much freight off the docks as they can to prepare for a backlog that comes after the shutdown ends.

“Things won’t spiral out of control immediately,” Brashier said. “The pain is felt after you open back up and have all this pent-up demand.”

The longshoremen’s union has said it will continue to move military cargo and handle cruise ships during a strike. Oil and gas terminals are operated by separate workforces and will not be affected, according to the American Petroleum Institute.

Details of the negotiating points have not been disclosed. The union is seeking substantial raises, after seeing pay fall behind inflation, and protections against automated systems it says will put jobs at risk. But talks between the union and the maritime alliance have been largely stalled since June, when the longshoremen accused a port in Alabama of using an automated gate in violation of their contract. The management alliance filed a complaint with the National Labor Relations Board, seeking an order that the union continue to bargain. But even as the deadline neared, there were no signs of progress.

Business groups have been calling on the White House to step in to break the impasse. Some forecasts predicting a more muted impact assume that, with the election just weeks away, President Joe Biden will intervene in the labor dispute to head off more serious economic costs.

“There is little chance that the administration would risk jeopardizing its recent economic successes less than two months before a tightly-contested election,” Bradley Saunders, North America economist for Capital Economics, wrote in a Sept. 25 note to clients.