U.S. ports from Maine to Texas shut down Tuesday when the union representing about 45,000 dockworkers went on strike for the first time since 1977.
A lengthy shutdown could raise prices on goods around the country and potentially cause shortages and price increases at big and small retailers alike as the holiday shopping season — along with a tight presidential election — approaches.
“First and foremost, we can expect delays to market. And those delays depend on really what the commodities are and priorities at the ports and how quickly things move,” said Mark Baxa, president of the Council of Supply Chain Management Professionals.
What are the issues in the dockworkers strike?
The International Longshoremen’s Association is demanding significantly higher wages and a total ban on the automation of cranes, gates and container-moving trucks that are used in the loading or unloading of freight at 36 U.S. ports. Those ports handle roughly half of the nations’ cargo from ships.
The contract between the ILA and the United States Maritime Alliance, which represents the ports, expired Tuesday. Some progress was reported in talks late Monday, but the union went on strike anyway.
The union’s opening offer was for a 77% pay raise over the six-year life of the contract, with President Harold Daggett saying it’s necessary to make up for inflation and years of small raises. ILA members make a base salary of about $81,000 per year, but some can pull in over $200,000 annually with large amounts of overtime.
Monday evening, the alliance said it had increased its offer to 50% raises over six years, and it pledged to keep limits on automation in place from the old contract. The alliance also said its offer tripled employer contributions to retirement plans and strengthened health care options.
Which ports are affected?
While any port can handle any type of goods, some ports are specialized to handle goods for a particular industry. The ports affected by the shutdown include Baltimore and Brunswick, Georgia, the top two busiest auto ports; Philadelphia, which gives priority to fruits and vegetables; and New Orleans, which handles coffee, mainly from South America and Southeast Asia, various chemicals from Mexico and North Europe, and wood products such as plywood from Asia and South America.
Other major ports affected include Boston; New York/New Jersey; Norfolk, Virginia; Wilmington, North Carolina; Charleston, South Carolina; Savannah, Georgia; Tampa, Florida; Mobile, Alabama; and Houston.
Can the government intervene?
If a strike were deemed a danger to U.S. economic health, President Joe Biden could, under the 1947 Taft-Hartley Act, seek a court order for an 80-day cooling-off period. This would suspend the strike.
But Biden, during an exchange with reporters on Sunday, said “no” when asked if he planned to intervene to plan a potential work stoppage impacting East Coast ports.
“Because it’s collective bargaining, I don’t believe in Taft-Hartley,” Biden said.
How will this affect consumers?
The strike could last weeks — or months. If the strike is resolved within a few weeks, consumers probably wouldn’t notice any major shortages of retail goods. But a strike that persists for more than a month would likely cause a shortage of some consumer products, although most holiday retail goods have already arrived from overseas. Shoppers could see higher prices on a vast array of goods, from fruit and vegetables to cars.
Retailers are making contingency plans
Since the major supply chain disruption in 2021 caused by pandemic bottlenecks, retailers have adapted to supply chain disrupters being “the new norm,” said Rick Haase, owner of a mini-chain of Patina gift shops in and around the Twin Cities in Minnesota.
“The best approach for Patina has been to secure orders early and have the goods in our warehouse and back rooms to ensure we are in stock on key goods,” Haase said.
Daniel Vasquez, who owns Dynamic Auto Movers in Miami, which specializes in importing and exporting vehicles, increased inventory, specifically for vehicles that take longer to ship, in anticipation of a strike.
He has also stopped relying on one port or shipping partner and has expanded his relationship with smaller ports and shipping companies that can bypass congested areas.
“This move provides us with an edge — having backup partners in place means we can reroute shipments efficiently if the strike hits hard,” Vasquez said.
How will a strike affect holiday shopping?
Jonathan Gold, vice president of the supply chain and customs policy at the National Retail Federation, the nation’s largest retail trade group, said the strike arrives with the supply network continuing to face challenges from Houthi attacks on commercial shipping that have essentially shut down the use of the Red Sea and Suez Canal.
The uncertainty over the supply chain is taking place at the peak of the holiday shipping season for retailers, which traditionally runs from July through early November. Many big retailers, anticipating a strike, started shipping their goods to U.S. distribution centers in June, and Gold said that the majority of products ordered are already in the U.S.
But retailers will have a hard time replenishing items and are incurring extra warehouse costs to store goods longer. Gold also noted that carriers are already announcing surcharges on containers to address potential disruptions.
The Toy Association, the nation’s leading toy trade group, was one of roughly 200 trade groups that sent a joint letter to President Biden earlier this month urging the administration to work with ILA and USMX to come up with a contract. Greg Ahearn, its president and CEO, noted that a strike would happen at an extremely critical time for toy sellers and makers — up to 60% of a toy company’s annual sales come during the fourth quarter.
The holiday shipping window for the toy industry is anywhere from six to eight weeks and started in July, though some toy companies tried to ship earlier or add more toys to shipments, Ahearn said.
“It hits many ways,” he said. “From a consumer perspective, it starts with delays in availability and then starts to surface as product shortages within toys. At retail for the toy industry, it results in potentially higher prices based on scarcity and increased costs.”
AP Writers Tom Krisher in Detroit and Stephen Groves in Dover, Delaware, contributed to this report.
