US retailers brace for potential pain from a longshoremen’s strike
As a strike by longshoremen threatens to close ports on the East and Gulf coasts this week, Chris Butler is growing increasingly concerned.
Butler is CEO of the National Tree Company, and like many other companies, he is counting on shipments en route from Asia but not reaching their ports sooner than expected. strike by dock workers starting at 12:01 a.m. Eastern Time on Tuesday.
The company, based in New Jersey, is an importer of artificial Christmas trees and other Christmas decorations. If a strike lasted only a few days, there might still be time afterwards to unload the trees, transport them to the warehouses and get them ready for customers this season.
But if a strike were to keep the ports closed until, say, November, about 150,000 trees might not arrive in time for the peak season, imposing costs on National Tree and other companies. At worst, these costs, multiplied across all sectors, could fuel inflation and put pressure on the US economy.
“Definitely not an ideal situation,” Butler said.
National Tree has already stocked or delivered most of the approximately 2 million artificial trees it sells annually. But revenue would be lost if 150,000 of the trees were stuck in the pipeline.
Other companies are facing the same problem, with goods potentially stranded at sea if 45,000 members of the International Longshoremen’s Association make good on their threat to strike. They could close 36 ports from Maine to Texas, which handle about half of the goods shipped to and from the United States. (West Coast longshoremen are members of a different union and are not involved in the strike.)
A prolonged strike would force companies to pay shippers for the delays, and goods could arrive too late for the peak of the holiday shopping season. On Friday, top Biden administration officials met with port operators and told them they needed to negotiate with the union by Tuesday, according to a White House official who insisted on anonymity to discuss an ongoing meeting.
Butler says he hopes for an agreement or government intervention to stop a strike. But the US Maritime Alliance, which represents shippers and ports, and the dockworkers union Haven’t met since June. And no conversations are planned.
The union is demanding significantly higher wages and a total ban on the automation of cranes, gates and moving containers when loading and unloading cargo.
The Toy Association, the nation’s largest toy trade group, was one of about 200 organizations that asked President Joe Biden in a letter this month to work with both sides to reach an agreement. The National Grain and Feed Association also urged Biden to take action to avoid a strike, which would come just as the harvest season gets underway.
Their pressure has put Biden and Vice President Kamala Harris, the Democratic presidential candidate, in a sensitive position: Both have enlisted the support of unions and do not want to be seen as pressuring the dockworkers to reach a settlement. But if a prolonged strike were to cause shortages of consumer goods or fuel high inflation, it could cost Harris votes in the November election.
Under the Taft-Hartley Act, Biden could seek a court order to suspend the strike for an 80-day cooling-off period. Robyn Patterson, a White House spokesperson, said in a statement that the administration has never invoked the law and is not considering it now.
Biden and Congress did so too step inside two years ago to block a threatened rail freight strike and force these workers to accept an agreement, due to widespread fears that a rail strike would have damaged the economy.
Alex Hertel-Fernandez, an associate professor of international and public affairs at Columbia University and a Labor Department official under Biden, suggested the administration will follow the playbook it used last year in talks between West Coast ports and the union there: mediate negotiations without direct intervention.
Greg Ahearn, CEO of the Toy Association, said a strike would come at a crucial time for toy sellers and makers, with up to 60% of annual sales taking place from October to December. While some toy companies have previously shipped goods, Ahearn said a strike would make it difficult to restock popular items.
He warned that a strike could increase toy prices “based on scarcity and higher costs.”
At National Tree, Butler and his crew began preparing for a strike in July. They expedited shipments for everything they could. But one major retail customer, he said, asked for trees early. And until recently, factories in China and elsewhere couldn’t produce the rest of National Tree’s orders.
Ships carrying the trees are en route to New York, but will not arrive there until Tuesday. According to Butler, a prolonged strike would result in most trees having to be stored until next Christmas.
A strike by port workers would further endanger the global supply chain, which has already been slowed by attacks by Yemen’s Houthi rebels on commercial shipping. These attacks have virtually halted use of the Red Sea and Suez Canal, said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation. The attacks are forcing longer transit times for ships that must sail around the Cape of Good Hope to reach ports on the East Coast and Gulf Coast.
A dockworkers strike could be even more damaging than the pandemic-induced port congestion in 2021 and 2022, when cargo was allowed to move, albeit slowly, according to Gold.
The eastern ports could be at a standstill. Gold noted that carriers are already announcing surcharges on containers to address potential disruptions, a trend that could increase inflation.
Many retailers may find it difficult to charge customers more to offset those costs. According to Gold, the most vulnerable are small companies that do not import directly and do not have the financial resources to incur higher costs.
Shippers could divert some of the freight to West Coast ports. But those ports couldn’t come close to absorbing the extra cargo. The Port of Los Angeles, for example, moved 960,000 containers in August — about 80% of capacity — says Gene Seroka, executive director.
The major Western railroads, Union Pacific and BNSF, have added capacity to their systems to handle more freight as imports have increased. Eastern railroads CSX and Norfolk Southern say they can move cars and crews to move more freight from the west to Chicago. But it’s not clear how much more the railroads can manage.
In any case, Butler said, it would be too expensive for him to ship trees across the country by rail.
Taylor Green, co-founder of Los Angeles landscaping company Artificial Grass Solutions, which imports artificial grass, said he bought 25% more artificial grass than normal to ensure there would be enough for customers’ projects. He also made agreements with alternative suppliers in case the strike continued indefinitely. If so, Green says, price increases are likely necessary.
Still, Artificial Grass, like some larger retailers and manufacturers, says it is better prepared for shortages than during the pandemic.
“We have learned to be proactive rather than reactive,” Green said.
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Associated Press writers Anne D’Innocenzio and Mae Anderson in New York, Josh Boak in Washington and Josh Funk in Omaha, Nebraska, contributed to this report.