How a U.S. Port Strike Could Affect You

A looming strike by dockworkers at ports from Massachusetts to Texas could snarl supply chains and raise prices on a wide array of consumer goods—just as the holiday shipping season approaches.

Members of the International Longshoremen’s Association, a union representing 85,000 dockworkers, plan to strike Tuesday if they can’t reach agreement on a new contract with the United States Maritime Alliance, which represents large shipping lines. A walkout would be the first East Coast dock strike in the U.S. since 1977.

A strike would shut down container facilities at 14 ports stretching from Boston to Houston. Those ports handled more than 68% of all containerized U.S. imports last year.

Here’s a look at some of the ways a strike could affect the U.S. economy.

Shipping Delays

The most immediate impact would be that goods would stop getting unloaded at the affected ports. Even if the strike only lasted for a few days, the ripple effect would continue for weeks or longer.

In addition to costing the U.S. economy as much as $5 billion per day—a run rate equaling 6% of U.S. annual gross domestic product (GDP)—transportation analysts at J.P. Morgan said Thursday in a research note that major shipper and logistics company Maersk has estimated that it would take four to six weeks to work through shipping backlogs for each week the ports don’t operate.

That could have profound implications for retailers and consumers awaiting goods for the holiday shopping season, which accounts for a fifth of all annual U.S. retail sales revenue.

“For retailers, that means holiday shipments might not arrive on time,” the National Retail Federation warned earlier this month.

Some retailers are trying to defend against a possible shutdown. Costco Chief Executive Officer Roland Vachris on Thursday said on a company conference call following its earnings release that Costco is pre-shipping in anticipation of a strike.

“The port strike is something we’ve been watching very closely for some time. … We’ve done several different things that we could to get holiday goods in ahead of this timeframe and looked at alternate plans that we could execute with moving goods to different ports and coming across the country if needed,” Vachris said on the call, a transcript of which was made available via AlphaSense.

Escalating Prices

A strike Tuesday would occur just two weeks after the Federal Reserve cut interest rates for the first time since the pandemic. The Fed’s decision coincided with moderating inflation. Its favored consumer inflation gauge fell 2.2% in August, the lowest level in three-and-half years.

An extended strike, though, could again drive prices higher—and potentially meaning a stumbling block on the Fed’s rate-cut path.

The ports that could close Tuesday haven’t shut down for a strike since October 1977. That strike lasted 44 days. Similar to this year, monthly inflation rates declined throughout the summer and early fall then. But in the wake of the strike, inflation in November rose 0.5% from the previous month, the first time in six months it had increased year-on-year.

A port strike likely would also raise global freight rates, which are in a prolonged slump. At least in the short term, that would benefit shippers but raise costs for their customers and consumers.

“Recent freight [rate] recessions have ended suddenly when a disruption shocked the market,” JP Morgan said in its recent research note on the dockworkers’ labor negotiations. “A potential ILA strike could be a catalyst to end the current malaise.”

Supply Shortages

The volume of goods moving through ports along the East and Gulf coasts means that consumers and businesses could face shortages of products from electrical equipment to footwear.

Cars and auto parts sit near the top of the list. European-made automobiles traditionally ship through East Coast ports; no U.S. port handles more passenger vehicle imports than the Port of Baltimore.

At the other end of the price spectrum, buyers of cheap produce beware: About 75% of all bananas imported into the U.S. come through East or Gulf Coast ports. Consumers may have to go without them if a strike ensues.

Jason Miller, a supply chain professor at Michigan State University, said in a recent social media post that shifting those banana imports to West Coast ports or flying them on planes isn’t economically feasible, adding that “you can’t frontload a perishable product.”