Can Negotiators Avert Another Strike and Save Christmas Again?

As negotiations between port operators and dockworkers pick up again this week, concerns are mounting over a potential strike at East and Gulf coast ports. Such a strike could disrupt supply chains significantly, leading to shortages and price hikes for a multitude of products.

On Tuesday, the United States Maritime Alliance (USMA), which represents the employers at these ports, engaged in discussions with the International Longshoremen’s Association (ILA) leaders. This meeting marked the first negotiation attempt since their previous talks collapsed in mid-November.

Should these negotiations fail to reach an agreement by January 15, over 45,000 port workers from Maine to Texas might begin to strike, potentially causing severe economic disruption and accelerating inflation, according to experts.

“The implications are extremely serious,” Matt Lekstutis, a director at global procurement and supply chain consultancy Efficio, commented. He highlighted that these ports handle 56% of all U.S. shipping containers, making their smooth operation critical to avoiding a logistical meltdown.

Potential Repeat of Port Strike?

In October last year, dockworkers at 36 ports along the East and Gulf coasts initiated a strike—the first since 1977—lasting three days and costing the economy an estimated $5 billion daily as it hindered imports and exports, analysts at JP Morgan stated. The strike concluded when both parties agreed on a temporary 62% wage increase for ILA members over six years, along with an extension until January 15 to further discuss port automation.

Employers are pushing for automation to efficiently manage higher volumes of goods, arguing that it benefits all parties involved.

The ILA, however, sees it differently.

“This debate isn’t about enhancing safety or productivity—it’s about phasing out jobs,” ILA Executive Vice President Dennis Daggett stated in a recent release. He accused port operators of using progress as a pretext to maximize profits at the expense of stable American jobs.

What Impact Could a Strike Have?

Experts warn that both consumers and businesses could face higher prices and product shortages, particularly if the strike extends beyond a week.

The National Retail Federation (NRF), a trade association, pointed out that industries are still grappling with the financial strain from the three-day strike in October. Another strike would exacerbate these challenges, according to Jonathan Gold, NRF’s vice president of supply chain and customs policy. He explained that the recovery time from each strike day could range from three to five days, with longer strikes causing more significant setbacks. He recalled how it took six months to recover from an 11-day port strike back in 2002.

“Such disruptions could severely affect critical sectors like retail, automotive, electronics, and agriculture, leading to increased costs, production delays, and inventory shortages,” stated John Donigian, Moody’s senior director of supply chain strategy.

Which Sectors Would Be Most Affected?

Imports: Approximately half of the U.S. ocean imports that go through the East and Gulf Coast ports would be impacted. Affected goods range from produce, automobiles, machinery parts, apparel, pharmaceuticals, alcohol, festive merchandise, and seafood, experts indicate.

“If a strike lasts more than a week, we could see a sharp rise in both shipping and goods prices, potentially mirroring or exceeding the peak inflation levels experienced last year,” said Eric Clark, portfolio manager at the Rational Dynamic Brands Fund.

Exports: Companies exporting goods internationally, like soybean and poultry farmers, would also suffer, potentially losing market share or facing financial losses due to the perishability of their products, experts noted. The American Farm Bureau Federation estimated that agricultural trade worth $1.4 billion weekly could be jeopardized by a strike or slowdown.

Jobs: Businesses maintaining minimal inventory levels to reduce costs might need to halt production lines during an extended strike, Gold mentioned. This would occur amidst an already slowing job market.

How Likely Is a Strike?

While USMX has not disclosed details about the progress of the talks held on Tuesday, companies are preparing for the possibility of a strike.

“There have been no new developments in negotiations,” reported Maersk, the world’s second-largest container carrier, in a customer advisory late December. They advised customers to manage their container transactions at U.S. East and Gulf Coast ports promptly to minimize potential disruptions.

Altair Global, a relocation company, estimated that each day of a strike could add about five days to shipment times and increase costs.

“The consequences would manifest as shipping delays, higher freight rates, and additional surcharges. Daily economic losses could reach billions,” it stated on its website on Tuesday.

The International Fresh Produce Association alerted its members last month to the increasing likelihood of a strike in mid-January, expecting worsened port congestion and possible disruptions in shipments.

Inopportune Timing

The potential strike looms at the end of President Joe Biden’s term and just days before President-elect Donald Trump’s inauguration. During the strike in October, Biden chose not to use the Taft-Hartley Act to reopen the ports but encouraged ongoing negotiations instead.

This time around, Biden has not publicly addressed the impending strike, set to begin only five days before his term concludes.

Meanwhile, Trump has shown support for the dockworkers. After a meeting with ILA President Harold Daggett, Trump criticized the automation projects on Truth Social last month, arguing that the savings do not justify the negative impact on American workers.

However, it remains uncertain whether the potential economic disruptions and business pressures might prompt Trump to change his stance, according to Alexander Hertel-Fernandez, a former Biden administration official and associate professor of International and Public Affairs at Columbia University.