Port workers on the U.S. East Coast and Gulf Coast began a strike early Tuesday, their first large-scale shutdown in nearly 50 years, halting the flow of about half of the country’s ocean shipping as negotiations over a new labor contract over wages had failed.
The strike is blocking everything from food to car shipments at dozens of ports from Maine to Texas. Analysts warned this will cost the economy billions of dollars a day, threaten jobs and possibly fuel inflation.
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The International Longshoremen’s Association union, which represents 45,000 longshoremen, had negotiated a new six-year contract with the employers’ group United States Maritime Alliance (USMX) before Monday’s midnight deadline.
The ILA said in a statement Tuesday that it closed all ports from Maine to Texas at 12:01 a.m. ET (0401 GMT) after rejecting USMX’s final proposal on Monday, adding that the offer “fell far short of the demands of its members to ratify a new contract”.
ILA leader Harold Daggett has said employers such as container ship operator Maersk and its APM Terminals North America have not offered adequate pay increases or agreed to demands to halt port automation projects that threaten jobs.
The USMX said in a statement Monday that it had offered to increase wages by nearly 50%, compared to an earlier proposal. Daggett, meanwhile, said the union is pushing for a 61.5% pay increase, according to CNBC.
“We are willing to fight for as long as necessary, to continue to strike for any period of time, to get the wages and protections from automation that our ILA members deserve,” Daggett said Tuesday.
USMX did not immediately respond to requests for comment.
Hundreds of longshoremen demonstrated Tuesday at the Port of New York and New Jersey, one of the largest affected ports, holding signs and shouting slogans as music blared and vendors offered food.
Daggett arrived to rally them to cheers of “ILA all the way!”
“You’ve got to keep it going, you’ve got to stay strong. You deserve it,” Daggett told them.
The strike, the ILA’s first major strike since 1977, is worrying companies that rely on maritime shipping to export their goods or secure crucial imports. It affects 36 ports – including New York, Baltimore and Houston – that handle a range of containerized goods from bananas to clothing and cars.
The strike could cost the U.S. economy about $5 billion a day, JP Morgan analysts estimate, by disrupting shipments from busy terminals.
The National Retail Federation on Tuesday called on President Joe Biden’s administration to use its federal authority to halt the strike, saying it could have “devastating consequences” for the economy.
U.S. Rep. Sam Graves, a Republican who chairs the House Transportation Committee, called on Biden to “act immediately to prevent this unnecessary damage to our economy.”
Biden officials have repeatedly said he will not do so as they urge both sides to reach an agreement.
Retailers have accelerated holiday imports in recent months and are shifting other shipments to the West Coast.
“We expect the strike itself to last five to seven days until a government intervention… but the ripple effect will probably be felt across the entire network in Europe, in Asia, at least into January and February,” said Peter Sand. , lead analyst at shipping pricing platform Xeneta.
There are nearly 100,000 containers waiting to be unloaded at the ports of New York City alone, now frozen by the strike, and 35 container ships are heading to New York in the coming week, said Rick Cotton, executive director of the Port Authority of New York. and New Jersey.
The union “controls the entire country,” said Steve Hughes, CEO of HCS International, which specializes in automotive purchasing and shipping. “I’m really worried it’s going to get ugly.”
The dispute also leaves labor-friendly Democrat Biden in a virtually no-win position with Vice President Kamala Harris in a razor-thin race for the White House with Republican former President Donald Trump.
White House Chief of Staff Jeff Zients and top economic adviser Lael Brainard urged a meeting of USMX board members Monday to resolve the dispute fairly and quickly, a White House official said.
The White House said in a statement Tuesday that it is monitoring the effects on the supply chain and assessing ways to address the potential impacts, noting that the initial impact on consumers is expected to be limited.
Officials told Reuters on condition of anonymity that they hoped for a short strike, noting that the two sides had resumed talks late on Sunday and narrowed their differences on Monday.
The U.S. Department of Agriculture said Tuesday it does not expect “significant changes in food prices or availability” in the near term.
BACKUP PLANS
Retailers that account for about half of total container shipping volume have been busy implementing backup plans as they head into the all-important winter sales season.
Many of the major players rushed Halloween and Christmas merchandise early to avoid strike-related disruptions, adding costs to shipping and storing those goods.
Retail giant Walmart, the largest U.S. container shipper, and Costco, a membership warehouse club operator, say they are doing everything they can to mitigate any impact.
New York Governor Kathy Hochul said the state does not expect an immediate impact on food supplies or essential goods, but said the impact could be greater depending on how long it lasts.
“It is critical for USMX and the ILA to quickly reach a fair agreement that respects workers and ensures the flow of trade through our ports,” she said Tuesday.
In Copenhagen, shares of Maersk fell almost 5% on Tuesday, taking profits after recent gains as investors expected significant increases in freight rates due to the strike, which would boost shipping companies’ profits.
The Danish company has said it would introduce a port disruption surcharge on all freight shipped to and from the US
East Coast and Gulf Coast terminals starting Oct. 21, ranging from $1,500 to $3,780 per container.