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on october 1, local time, about 45,000 dock workers at 36 ports on the east coast and gulf coast of the united states went on strike due to the breakdown of new labor contract negotiations due to wage and other issues.

it was the first strike at u.s. east coast and gulf coast ports in nearly 50 years. the 36 ports affected by the strike handle 57% of u.s. international container traffic and 87% of u.s. trade (measured in tonnage), the data shows.

photo source: photo by xinhua news agency reporter liu yanan

industry insiders are worried that large-scale strikes at ports will not only have a "devastating impact" on the u.s. economy, but may also trigger turbulence in the global supply chain. jpmorgan analysts estimate the strike could cost the economy $5 billion a day, which is equivalent to about 6% of u.s. daily gross domestic product.

diana feuchtgott-ross, former chief economist of the u.s. department of labor and former chief of staff of the president’s council of economic advisers, said in an interview with a reporter from the daily economic news, “in the long term, the real risk lies with foreign customers. there may be a permanent switch to other suppliers as supply chain disruptions lead them to look for more stable partners.”

in addition, domestic inflation in the united states may also accelerate again due to the strike, bringing uncertainty to the federal reserve's interest rate cut path.

about 45,000 u.s. workers strike at 36 ports

shortly after midnight on october 1, local time, a group of dockworkers began to protest at the port of philadelphia in the united states. they walked in circles at the railroad crossing outside the port, chanting: "no jobs without fair contracts." on the side of a truck, the international longshoremen’s association (ila) also hung a message board that read “automation hurts families: ila stands for job protection.”

this is just one aspect of the u.s. port strike. on the same day, 45,000 dockworkers at 36 ports in the united states from maine to texas went on strike, demanding higher wages and opposing the automation of port machinery and equipment. affected ports include new york, baltimore and houston, with more than three-quarters of coffee, tea, beverages and spirits imported, as well as significant exports of fertilizers, automobiles and medical/surgical equipment, according to the national association of manufacturers (nam). all are shipped through these ports on the u.s. east coast and gulf coast.

this is the first shutdown at u.s. east coast and gulf coast ports since 1977. labor negotiations between the ila and the united states maritime alliance (usmx), a shipping industry group representing terminal operators and ocean carriers, have reached a long-term deadlock.

usmx's proposal is for a nearly 50% wage increase over the proposed six-year contract, exceeding all other recent union agreements while accounting for inflation. they complain that the union is not negotiating in good faith: the two sides have not met face-to-face since june. the ila is seeking an annual wage increase of $5 per hour over the next six years of the contract, with the maximum wage raised from $39 to $69, which equates to a wage increase of nearly 80%.

ila chairman harold daggett issued a statement on social media: "the reason for this strike is because of the usmx's decision to insist on allowing foreign shipping companies to make billions of dollars in profits at u.s. ports. without paying the american longshoremen who brought them wealth, we are prepared to fight as long as necessary, no matter how long the strike takes, to fight for the wages our union members deserve and protection from automation. protection.” ila not only demands a significant increase in wages, but also advocates a complete ban on the use of automated equipment such as automatic cranes, automatic doors, and container trucks for loading and unloading goods.

currently, the national association of manufacturers (nam) is urging u.s. president joe biden to invoke his powers under the national security law and order workers back to ports as negotiations continue.

in this regard, diana fechtgott-ross, former chief economist of the u.s. department of labor and former chief of staff of the president’s council of economic advisers, said in an interview with a reporter from the daily economic news, “port workers are subject to the national labor relations board "the biden-harris administration cannot establish a presidential emergency committee and require mediation unless congress re-legislates port workers under the railroad labor act."

about half of the u.s.’s international shipping is “paralyzed”

daily economic losses could reach $5 billion

according to the conference board, the 36 ports affected by the strike handle 57% of the united states’ international container traffic and 87% of merchandise trade (measured in tonnage). global supply chains are expected to be affected by increasing freight congestion, imbalances in container supply and demand, and the inability of capacity to reach international ports where it is needed.

87% of commodity trade (by tonnage) moves through u.s. eastern and gulf of mexico ports image source: conference board report

the white house said in a statement that biden and vice president kamala harris were "monitoring potential impacts to supply chains and evaluating ways to address potential impacts."

peter sand, chief analyst of xeneta, a shipping rate intelligence platform, said in an interview with foreign media that the strike will have a domino-like chain reaction on the global supply chain. the first direct impacts will be on the eastern united states and the gulf coast. the strike will have a knock-on effect on ships currently queuing outside ports, with their next voyages to the united states carrying new cargo being delayed.

data from supply chain risk analysis company everstream analytics shows that as of october 1, local time, more than 38 container ships were waiting to anchor near u.s. ports, compared with only 3 last sunday (september 29).

"we will see disruptions to shipping, with some delays in ships leaving europe and the mediterranean by the end of october and early november, and delays in departures from asia in late december and early january," sand said. "this is basically the downturn for container shipping. a normal small peak, before the chinese new year,” sander said, expecting the strike to last a week.

oxford economics estimates that a week-long strike could reduce u.s. gross domestic product (gdp) by $4.5 billion to $7.5 billion. analysts at jpmorgan chase estimated that the strike could cause economic losses of us$5 billion per day, which is equivalent to about 6% of the us daily gross domestic product. even as shippers turn to west coast ports, congestion is likely to occur, causing cargo delays and significant increases in shipping costs.

danish shipping giant maersk warned that a one-week shutdown could take four to six weeks to recover, "and backlogs and delays are increasing every day." oxford university economist grace zwemer said in the report: "a strike of around two weeks could also disrupt supply chains into 2025."

"in the long term, the real risk is that foreign customers may permanently switch to other suppliers, as supply chain disruptions lead them to look for more stable partners," verchtgott-ross told reporters.

for u.s. consumers and businesses, an extended strike could affect shipments of bananas, manufacturing components, plywood, and raw materials such as cotton and copper. fresh meat and other refrigerated foods could also spoil, leading to shortages and higher prices.

feuchtgott-ross explained to reporters that strikes will increase prices, and the longer the strike lasts, the greater the inflationary pressure will be. if the strike lasts for several weeks, prices will rise and retailers will struggle to get goods before christmas. however, she said in the interview that she did not think the strike would last long and that the government would end the trouble before the election.

adam kamins, an economist at moody's analytics, said the food and automotive industries will face the most serious problems because they are particularly dependent on the upcoming port closures. the ensuing further acceleration in inflation could also create more uncertainty, forcing the federal reserve to be more cautious about cutting interest rates, which would weigh on the overall outlook for job growth and investment.

however, a spokesman for wal-mart, the largest retailer in the united states, told the daily economic news reporter that wal-mart is prepared for unforeseen disruptions in the supply chain and maintains additional supply sources, and there will be no shortages in the short term.