The possibility of a strike by port workers on the East and Gulf coasts is looming as negotiations between port operators and dockworkers are set to resume this week. A strike could disrupt supply chains, lead to shortages, and increase prices on hundreds of products.

The United States Maritime Alliance (USMA), representing employers at these ports, met Tuesday with the International Longshoremen’s Association (ILA) leaders to negotiate a new agreement. This meeting is the first since negotiations stalled in mid-November.

If an agreement isn’t reached by January 15, over 45,000 port workers across states from Maine to Texas could strike, significantly impacting the economy and exacerbating inflation, according to experts.

“This situation is extremely critical,” remarked Matt Lekstutis, director at Efficio, a global procurement and supply chain consultancy. “The stakes are exceedingly high,” noting that 56% of all shipping containers come through these ports.

Is a Port Strike Possible Again?

In October, dockworkers at 36 East and Gulf Coast ports staged their first strike since 1977 for three days, resulting in an estimated $5 billion economic loss daily as imports and exports faced delays, as reported by JP Morgan analysts. The strike concluded with a tentative agreement that included a 62% pay increase for ILA members over six years and an extension until January 15 to negotiate conditions regarding automation equipment at the ports.

Employers claim that automation is essential for enhancing the ports’ capacity to handle more goods, benefiting the economy.

The ILA disagrees, stating, “This issue isn’t about safety or efficiency; it’s about job losses,” said ILA executive vice president Dennis Daggett in a recent statement. “It aims to replace workers under the pretext of progress while enhancing corporate profits at the cost of sustaining good jobs in the U.S.”

Possible Impact of a Strike on Americans

The National Retail Federation (NRF), an industry trade association, noted that companies are already dealing with the financial burdens from the previous three-day strike, and another strike would only increase these difficulties.

“It’s not merely the halt in operations, but also the recovery time needed to resume normalcy,” explained Jonathan Gold, NRF’s vice president of supply chain and customs policy, during the October strike.

For every day of a strike, it typically requires three to five days to clear the resulting backlog and get things back to regular operations, he noted. “If the strike continues, the complications increase,” he added. Gold also mentioned that a past 11-day port strike in 2002 took six months to recover from.

“Any disruption at this time could have a cascading effect on vital sectors such as retail, automotive, electronics, and agriculture, leading to increased costs, production delays, and inventory challenges,” highlighted John Donigian, Moody’s senior director of supply chain strategy.

What Would Be Affected?

Imports: As about half of U.S. ocean imports traverse the East Coast and Gulf Coast ports, numerous products could be impacted, including fresh produce, vehicles, parts for automobiles and machinery, clothing, medications, alcoholic beverages, holiday items like toys, and seafood, as per expert insights.

If a strike lasts longer than a week, “shipping and product prices could skyrocket,” warned Eric Clark, portfolio manager of the Rational Dynamic Brands Fund. “We might experience inflation for six months similar to or worse than past peak levels.”

Exports: Those selling products internationally could face significant losses. For instance, agricultural exporters of goods like soybeans and poultry may be unable to ship their products, risking lost market share and incurring financial losses due to perishability. The American Farm Bureau Federation has estimated that agricultural trade worth $1.4 billion per week is jeopardized if a strike or slowdown occurs.

Employment: Companies maintaining lean inventory levels might need to halt production lines during a drawn-out strike, as noted by Gold. This concern arises at a time when the job market is already showing signs of slowing down.

How Likely Is a Strike?

While USMX provided no updates on the negotiations from Tuesday, some companies are preparing for the potential of a strike.

“Negotiations have not shown any new progress,” stated Maersk, the world’s second-largest container shipping company, in a customer advisory on December 30.

“We strongly advise our customers to collect their loaded containers and return empty ones at U.S. ports.”

Maersk stated, “It’s essential to take action before January 15 regarding East and Gulf Coast ports. This initiative aims to prevent any possible interruptions at the terminals.”

According to Altair Global, a relocation firm, a strike could delay shipment transit times by around five days per strike day, which would lead to increased costs.

On their website, they mentioned, “The repercussions of a strike would manifest as shipping delays, escalated freight rates, and additional surcharges. Daily cost implications for the U.S. economy could reach billions.” They also indicated that some ocean carriers plan to introduce surcharges soon after the strike occurs.

Last month, the International Fresh Produce Association cautioned its members about the growing likelihood of a strike at East and Gulf Coast ports in mid-January.

They added, “We expect port congestion on the East Coast to intensify, which may result in containers being stuck and shipments getting disrupted.”

Inopportune Coincidence

A possible strike may coincide with the end of President Joe Biden’s term, just five days prior to President-elect Donald Trump’s inauguration.

During the port strike in October, Biden opted not to invoke the Taft-Hartley Act, which would have allowed the federal government to intervene and ensure ongoing negotiations during a mandated 80-day cooling-off period. Instead, he advocated for ongoing discussions.

So far, Biden has not commented on the potential strike that could begin five days before he leaves office.

On the other hand, Trump has expressed his support for dockworkers. After a meeting with ILA President Harold Daggett, Trump remarked about automation projects on Truth Social last month: “The savings do not outweigh the distress, harm, and suffering caused for American Workers, particularly for our Longshoremen.”

However, it remains to be seen whether the economic turmoil a strike could prompt, alongside business pressures, might compel Trump to change his stance, suggested Alexander Hertel-Fernandez, a former official from the Biden administration and current associate professor at Columbia University specializing in International and Public Affairs.