With less than a month before the call for a port strike beginning October 1, 2024, by the International Longshoremen’s Association, many sectors are on high alert within the U.S. economy. While negotiations have been slow and rocky between dockworkers and port operators, a possible strike could bring normal operations to a standstill at 14 major ports along the East and Gulf Coasts. This threatens the supply chains of top retailers like Walmart, Ikea, and Home Depot that make heavy utilization of these ports in their import operations.
Overview of the port strike
The ILA represents some 45,000 dock workers who are ready to strike if a new contract is not reached by the deadline. The involved ports handle approximately 68% of all containerized U.S. imports and form nodes that are rather vital in the supply chain. A strike would not just freeze unloading but may have cascading effects throughout disparate industries, particularly retail.
Economists estimate a strike could cost between $4.5 billion and $7.5 billion per week and shave 0.1% off annualized GDP. “The immediate impact would be delayed shipping and increased prices for consumers as retailers scramble to manage inventory shortages.”
Impact on major retailers
Amongst the major importers which are going to be severely hurt with this strike are Walmart, Ikea, and Home Depot. These businesses depend on having merchandise shipped in with little or no delay to maintain levels of inventories and sales to consumers.
- Walmart: the largest importer in all threatened ports, could face devastating disruption. The retailing giant has begun sending some shipments to other ports as a hedge against delays but may not be able to maintain stock levels during peak shopping seasons.
- IKEA: Another giant retailer of furniture and other home-oriented products, IKEA imports many products from various parts of the globe through East Coast ports. Therefore, any strike could delay shipment just when some of the favorite items need to be in stores for the holiday season, thus making customers frustrated with not being able to furnish their homes.
- Home Depot: They rely on imported building materials and tools. Such delays could put a damper on everything from construction projects to do-it-yourself work, especially since many consumers get ready for home renovations during the fall season.
Economic ripple effects
Of course, these are not the only retailers to be directly affected by a port strike, as furloughs in the transportation and warehousing industries would immediately take the strain as truck drivers and logistics personnel are laid off due to reduced cargo movement. This could lead to layoffs at American companies that do not import goods but rely on a steady flow of materials from the ports.
For example, aside from just the time wasted from such an incident, perishables like fresh produce may be in shortage if its shipment is delayed. About 75% of bananas imported into the U.S. come in through East or Gulf Coast ports; thus, consumers may find themselves with higher prices or limited availability for these common products.
Consumer impact
The impact of a port strike on regular consumers would be threefold:
- Increased prices: Retailers could turn around and pass their increased shipping costs on to consumers in a mad scramble to find alternative routes or expedited shipments through less congested ports3. This could raise the price on goods, from electronics to household essentials.
- Low quantities: Popular items could be in short supply since retailers might not be able to re-supply their merchandise during critical shopping seasons such as Black Friday and Christmas. Such a shortage may impact the retailer in terms of missed sales and also disappoint consumers.
- Inflationary pressures: A prolonged strike could reignite fears of inflation as chain disruptions would be translated into higher prices in many sectors of the economy. The Federal Reserve may be compelled to take another look at monetary policy as the rate of inflation might again begin to rise because of these same disruptions.
