US retailers, automakers, and other businesses are facing increasing freight rates as they prepare for a potential strike that could shut down nearly three dozen ports next week. The International Longshoremen’s Association, representing 25,000 dockworkers from Maine to Texas, has threatened to strike early next week unless port operators agree to raise wages and limit automation.
The potential strike could significantly impact east coast and gulf coast ports, which handle about half of the imported goods in containers, including food, pharmaceuticals, electronics, and apparel. This could cost the US economy up to $5 billion per day, according to JPMorgan analysts.
Businesses are bracing for potential disruptions in the supply chain, with large retailers already importing holiday merchandise and securing reservations with west coast carriers to avoid any disruptions. However, the increased demand for warehousing space has raised freight costs by up to 20%.
As businesses rush to import goods before the strike, shipping costs have surged. The cost of shipping a 40ft container from northern Europe to the east coast has risen by 29% since August. This could lead to supply chain constraints and price increases for consumers.
If the strike persists, economists warn of potential shortages and price hikes for consumers. The strike comes just weeks before the election, with the economy being a top concern for voters.
The Biden administration is working to encourage negotiations between the parties involved. President Biden has stated that he will not use the Taft-Hartley Act to force workers back to work.
Businesses are implementing costly contingency plans to secure their supply chains in case of a port shutdown. Leading shipowners have announced surcharges to cover higher operational costs during any disruption.
Despite the potential disruptions, businesses are preparing for the worst and trying to mitigate the impact of a potential strike on their operations.
The longer the strike continues, the more costs will be passed on to consumers.
Chris Butler, CEO of the National Tree Company, stated that if ports closed on Tuesday, 15% of their goods would be stranded. He estimated that each day of the work stoppage would result in a delay of an additional five days for their shipments.
Alex Naumov, COO of West Coast Shipping, recommended that clients transport their cars through the Port of Oakland in California, as operations on the east coast were already slowing down in anticipation of a strike.
Seth Harris cautioned that a strike would have severe financial consequences for companies.
“This will cost them a significant amount of money, and that money will not be recoverable.”