Nearly 50,000 union longshoremen walked off the job at midnight Tuesday, shuttering at least 14 major ports across the East and Gulf Coasts that handle nearly half of all U.S. imports. Many economists estimate the strike could cost the U.S. economy billions of dollars per day and eventually cause shortages and price hikes for popular products, particularly in the food and automobile industries.
The strike currently stretches from Maine to Texas and includes the Port of New York and New Jersey, the nation’s third-largest port by cargo volume, where General Motors, logistics giant Glovis America, and LG Electronics are the top three importers, according to data from ImportGenius cited by CNBC.
Overall, the affected ports handle $3 trillion in international trade per year, according to CNBC. Walmart, Ikea, and Samsung are the companies hit hardest across all affected ports, per ImportGenius. Those three companies alone account for nearly 125,000 of the standard shipping containers, which individually can hold up to 28 weight tons, per UPS, that have come through those ports in the past year.
While some logistics experts have said Canada and the West Coast are options to divert cargo, the International Longshoreman’s Association warned solidarity between strikers and union members across North America would thwart such efforts.
One company that is confident it can weather the slowdown is Costco. At the company’s latest earnings call on last week, CEO Ron Vachris said the wholesale club had pre-shipped many items ahead of the holiday season and does not import much of its food.
Could the port strike cause a recession?
Certain industries, however, will certainly feel the strike’s impact. For example, one quarter of the nation’s bananas, America’s favorite fruit, come in through the striking ports, according to the American Farm Bureau.
Besides food and European autos, experts said the striking ports are also important gateways for the pharmaceutical and apparel industries. Steve Lamar, CEO of the American Apparel and Footwear Association, told CNBC that East and Gulf Coast ports account for 53% of all imported apparel, footwear, and accessories in the U.S., or about $92 billion worth of goods.
The Anderson Economic Group calculated a one-week strike would cost longshoreman and the United States Maritime Alliance $2.1 billion. The firm acknowledged other estimates have said the strike will cost the wider U.S. economy billions of dollars per day, but Anderson said its analysts believed that the strike would delay, not destroy, trade.
Alan Murphy, founder and CEO of Sea-Intelligence, told CNBC major impacts from the strike would be felt after two to three weeks. It could cause a recession, he said, if it lasts more than a month.
Negotiations between the ports and longshoremen initially broke down in June after the union alleged ports had violated rules on the use of automation. In a last-ditch effort to avoid the strike, the Maritime Alliance said Monday it had offered to increase wages by more than 50% over six years. The union is reportedly demanding that pay rise 77% over the course of the contract, with top pay climbing from $39 to $69 an hour, according to CNN.
This isn’t the only major labor dispute that could rattle the U.S. economy. In Washington State, the strike of Boeing factory workers entered its third week after another round of talks failed to produce an agreement. The first two weeks of the strike reduced U.S. GDP by $1 billion, according to economic analysis and modeling company IMPLAN.