Just as U.S. policymakers shift focus from curbing inflation to shoring
up the job market, the economy faces a jolt that threatens the kind of
supply chain disruption and consumer discontent rife during the
pandemic.

This time, the shock looms just weeks before a knife-edged election.

Some 45,000 dockworkers at every major eastern and Gulf coast port are
threatening to strike Oct. 1. With talks at a stalemate since June,
industry officials now believe a strike is inevitable, and ocean
carriers and port operators have started sending out customer advisories
and making contingency plans.


The trade gateways involved handle more than half of all goods shipped
in containers to and from the U.S. A weeklong strike could cost the
economy as much as $7.5 billion, according to one estimate. Millions of
boxes of specialized cargo like bananas, plywood and autos could be hit,
though energy terminals wouldn’t be affected.

If a strike does proceed, the flow of consumer goods, components for
factories and certain vehicles would seize up, disrupting auto supply
chains and other manufacturing networks in election battleground states.
Refrigerated fruit imports and fresh meat exports would face spoilage
and diversions, leading to shortages and higher prices.


The ripple effects would spread globally as port congestion bogs down
shipping capacity and drives up freight rates, analysts warn.

The two sides remain far apart. The union is demanding a near-80% raise
over six years, arguing workers deserve a share of profits won by
foreign-owned container carriers during the pandemic. Reluctant to set
such a precedent — and with some reserves in the bank — companies could
wait it out longer than usual.

“A sleeping giant is ready to roar on Tuesday, October 1, 2024, if a
new Master Contract Agreement is not in place,” Harold Daggett, the
tough-talking leader of the International Longshoremen’s Association,
said in a Sept. 17 statement.

Terminal operators and ocean carriers, represented by the United States
Maritime Alliance, or USMX, said in August their offer contains an
“industry leading” wage increase — closer to the 32% won by West Coast
dockworkers last summer.

But there’s another, even more intractable issue at stake. Daggett is
demanding more restrictive language on automation, alleging certain
companies are using technology in violation of the current contract.

USMX’s offer preserves language on technology that’s in the current
contract, which its members view as a concession against a global
backdrop where automation is widely used at the world’s largest
facilities, including in China, the Netherlands and UAE.

“It is disappointing that we have reached this point where the ILA is
unwilling to reopen dialogue unless all of its demands are met,” the
USMX said in a statement last week.

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Ports strike
With just over a week before the deadline, the deadlock risks turning
into a game of chicken that threatens an economy that’s weathering a
sharp slowdown in job growth with lingering inflation concerns.

It would also test the White House’s willingness to get involved in the
final month of a campaign geared toward winning union votes. Retailers,
trade groups and House lawmakers are calling on the administration to
help with negotiations — and intervene should a strike occur.

The union has warned the White House against getting involved. It has
withheld endorsing a presidential candidate, though, according to
Daggett, former President Donald Trump “promised to support the ILA in
its opposition to automated terminals” during a Mar-a-Lago meeting last
fall. Neither Trump nor Vice President Kamala Harris has drawn public
attention to the strike threat.

Jason Miller, an expert on supply chains at Michigan State University,
assessed the goods most reliant on the affected ports, and found auto
parts would be particularly hard hit. That could put carmakers in swing
states like Michigan and Georgia in a bind.

Stellantis NV, which is facing its own strike threat, has an inventory
buildup thanks to slow sales, though supply chain issues could still
hamper production of particular models. The company didn’t respond to a
request for comment.

Foreign automakers would also be affected, Miller says. South Korean
parts imports enter primarily through the East and Gulf Coasts, feeding
Hyundai Motor Co. and Kia Corp. plants in Alabama, Georgia and, to a
lesser extent, Michigan.

BMW AG, the top US auto exporter, ships about 60% of its production out
of South Carolina. The German company also imports all of the engines
and transmissions it uses in U.S.-made gas-powered vehicles, plus some
high-end models.

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The impact on everyday staples would appear soonest in items that cannot
be stockpiled. Americans consume more bananas per capita than any other
fresh fruit, and, according to Miller, two-thirds of them are unloaded
at East and Gulf Coast ports.

As a key distribution hub for Dole Fresh Fruit Co. and Chiquita Fresh
North America, Port Wilmington in Delaware is the nation’s No. 1
gateway for bananas and an entryway for a range of other fruit — grapes
from Chile, clementines from Morocco, pears from Argentina and kiwifruit
from New Zealand.

They’d spoil if left on the docks too long, or face higher costs given
the delays and extra refrigeration needs.

“Any fruit that arrives after Oct. 1 will be condemned to the trash
can” if dockworkers walk out, said produce importer Peter Kopke Sr.
“And all of the people who have invested in that business will lose a
fortune.”

Kopke’s imports — mainly citrus and grapes at the moment — mostly enter
through Wilmington and Philadelphia, ending up at stores like those of
Walmart Inc., Costco Wholesale Corp. and Target Corp. nationwide. For
consumers, the price of fruit would go up within a week or two and
“many small firms, privately owned, may be forced out of business,” he
said.

Gabriela D’Arrigo, a marketing executive at produce distributor
D’Arrigo New York, said if imports stopped “we would go out of the
West Coast/LA, and then truck it” if needed — showcasing the kind of
disruptions a strike would entail.

The union is set to meet Sept. 24 to discuss details on how certain
goods would be treated during a strike, including whether some shipments
would continue to be unloaded, according to an ILA spokesperson, who
declined to comment on whether bananas or other fresh fruit are at risk.

Affected grocery items go beyond fruit. Chilled beef and pork exports —
among the most profitable food items — are particularly vulnerable.

“The protein supply chain cannot be stopped: the calves, hogs keep
growing,” said Peter Friedmann, executive director of the Agriculture
Transportation Coalition. “The frozen products can be stored, in cold
storage facilities, but those will be quickly filled to capacity.”

When that happens, farmers are forced to push products onto the domestic
market, causing prices to plummet. “As we saw during the prior COVID
crisis, some farmers will simply cease production,” Friedmann said.
“They go out of business.”


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President Joe Biden could ultimately invoke the Taft-Hartley Act, which
would force workers back to work during a “cooling off period” —
though that could jeopardize union support for Harris heading into
Election Day.

The Biden-Harris administration has never invoked Taft-Hartley to break
a strike and isn’t considering doing so now, a White House official
said last week.

As for the broader economic impact, the backlog from a weeklong strike
would take at least four weeks to clear and impose a $4.5 billion to
$7.5 billion hit, according to Grace Zwemmer at Oxford Economics. She
expects that the drag would be made up once the strike is resolved and
ports process any backlogs.

But by then the election will be over.



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