How a looming U.S. port strike could affect prices for holiday shoppers

U.S. ports stretching from Maine to Texas could face closures on Tuesday if a union representing around 45,000 dockworkers follows through with a threatened strike.

A prolonged shutdown could lead to price hikes on goods across North America and may result in shortages and increased costs for both large and small retailers as the holiday shopping season, along with a tight presidential election, approaches.

“First and foremost, we can expect delays to market. And those delays depend on really what the commodities are and priorities at the ports and how quickly things move,” said Mark Baxa, president of the Council of Supply Chain Management Professionals.

WHAT ARE THE ISSUES IN THE DOCKWORKERS STRIKE?
The International Longshoremen’s Association is seeking significant wage increases and a complete ban on the automation of cranes, gates, and container-moving trucks used in loading or unloading freight at 36 U.S. ports, which handle about half of the nation’s cargo from ships. The contract between the International Longshoremen’s Association and the United States Maritime Alliance, representing the ports, is set to expire on Tuesday. Negotiations have not occurred since June, and a strike by the ILA workers would mark the first such action by the union since 1977.

“The Ocean Carriers represented by USMX want to enjoy rich billion-dollar profits that they are making in 2024 while they offer ILA Longshore Workers an unacceptable wage package that we reject,” the ILA stated in a Monday announcement.

WHICH PORTS ARE AFFECTED?
While ports can handle various types of goods, some specialize in particular industries. Ports likely to be impacted by the shutdown include Baltimore and Brunswick, Georgia, the two busiest auto ports; Philadelphia, which focuses on fruits and vegetables; and New Orleans, which processes coffee mainly from South America and Southeast Asia, as well as various chemicals from Mexico and Northern Europe, and wood products like plywood from Asia and South America.

Other major ports that could be affected include Boston; New York/New Jersey; Norfolk, Virginia; Wilmington, North Carolina; Charleston, South Carolina; Savannah, Georgia; Tampa, Florida; Mobile, Alabama; and Houston.

CAN THE GOVERNMENT INTERVENE?
If the strike is seen as a threat to the U.S. economy, President Joe Biden could invoke the 1947 Taft-Hartley Act to seek a court order for an 80-day cooling-off period, thereby suspending the strike. However, Biden stated during a press briefing on Sunday that he did not plan to intervene regarding a potential work stoppage affecting East Coast ports.

“Because it’s collective bargaining, I don’t believe in Taft-Hartley,” Biden said.

HOW WILL THIS AFFECT CONSUMERS?
The strike could last weeks or even months. If it resolves within a few weeks, consumers may not notice significant shortages in retail goods. However, if the strike extends beyond a month, some consumer products may become scarce, although most holiday retail items have already arrived from overseas. Shoppers could face higher prices on a wide range of goods, from fruits and vegetables to vehicles.

RETAILERS ARE MAKING CONTINGENCY PLANS
Since the significant supply chain disruptions of 2021 caused by pandemic-related bottlenecks, retailers have learned to adapt to ongoing supply chain challenges, according to Rick Haase, owner of a mini-chain of Patina gift shops in the Twin Cities, Minnesota.

“The best approach for Patina has been to secure orders early and have the goods in our warehouse and back rooms to ensure we are in stock on key goods,” he explained.
Daniel Vasquez, owner of Dynamic Auto Movers in Miami, Florida, which specializes in importing and exporting vehicles, has increased inventory, especially for vehicles that require longer shipping times, in anticipation of a strike. He has also diversified his shipping partners and ports to avoid congested areas.

“This move provides us with an edge — having backup partners in place means we can reroute shipments efficiently if the strike hits hard,” he stated.

HOW WILL A STRIKE AFFECT HOLIDAY SHOPPING?
Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, the largest retail trade group in the U.S., noted that the potential strike comes amidst ongoing challenges from Houthi attacks on commercial shipping that have effectively shut down the Red Sea and Suez Canal.

This uncertainty coincides with the peak of the holiday shipping season for retailers, which typically runs from July through early November. Many large retailers began shipping goods to U.S. distribution centers in June in anticipation of a strike, and Gold highlighted that the majority of products are already in the U.S.

However, retailers may struggle to restock items and are incurring additional warehouse costs to store goods longer. Gold also mentioned that carriers are already announcing surcharges on containers to account for potential disruptions.

The Toy Association, the leading toy trade group in the country, was among approximately 200 trade organizations that sent a joint letter to President Biden earlier this month, urging the administration to work with the ILA and USMX to negotiate a contract. Greg Ahearn, the association's president and CEO, emphasized that a strike would occur at a critical time for toy sellers and manufacturers, as up to 60% of a toy company’s annual sales happen during the fourth quarter.

The holiday shipping window for the toy industry spans six to eight weeks, beginning in July, though some toy companies attempted to ship earlier or increase toy quantities in shipments, Ahearn noted.

“It hits many ways,” he said. “From a consumer perspective, it starts with delays in availability and then manifests as product shortages within the toy sector. For retail in the toy industry, it could lead to higher prices due to scarcity and increased costs.”