What a prolonged port strike in the US could mean for global supply chains

A massive longshoremen’s strike at seaports on the U.S. East and Gulf Coasts is expected to have a devastating impact on global supply chains and the economy, as American consumers are likely to notice shortages of popular products amid prolonged work stoppages.

Workers at ports from Maine to Texas went on strike early Tuesday over a dispute over wages and automation. The action, which is likely to have serious consequences for ships carrying billions of dollars’ worth of cargo, is the first by the International Longshoremen’s Association (ILA) union in nearly half a century.

The ILA, which represents around 45,000 longshoremen, has made good on its threat to strike at 14 major ports after talks with employers group United States Maritime Alliance (USMX) collapsed before the September 30 deadline.

“The key takeaway here is that duration magnifies impact,” Lisa DeNight, managing director of national industry research at Newmark, told CNBC’s “The Exchange” on Monday.

“If this strike lasts a few days, the impact is, well, short-lived, I would say. If this strike drags on, it will have cascading effects across the entire global economy – not just the U.S. economy. So, the “unpredictability of this issue is really at play here and has the magnitude to really shake up global supply chains,” she added.

DeNight said even a minor disruption of just a few days could have a “really significant impact on certain industries,” including pharmaceuticals, automotive and manufacturing.

Ocean supply chains have already been hit hard this year by conflict in the Red Sea, a prolonged drought in the Panama Canal and the collapse of the Baltimore Bridge.

Still, Peter Sand, principal analyst at ocean freight rate intelligence platform Xeneta, said that with more than 40% of total “containerized goods” entering the U.S. through ports on the East and Gulf Coasts, “the stakes cannot be higher could.” “

Speaking to CNBC’s “Street Signs Europe” on Tuesday, Sand said he expected the strike to last a week.

“We are now seeing the dominoes fall in multiple phases. “The immediate impact is obviously on the eastern United States and the Gulf Coast first, right?” Sand said.

There will then be a knock-on effect for ships currently queuing at ports, he added, in that their next voyages carrying new goods to the US will be delayed.

“We will experience disruptions as some ships depart Europe and the Mediterranean late towards the end of October and early November,” Sand said.

The ships will depart Asia late in late December and early January – “and that is essentially when the next normal mini-peak in container shipping occurs in the run-up to Chinese New Year.”

“So it really is the time of crisis as there are so many things at stake now. “You could say it’s a perfect storm, but it’s also a really good bargaining position for those who want a strike,” Sand said.

For American consumers, the strikes could soon lead to shortages of perishable or temperature-controlled goods such as bananas and other fresh fruits, he said.

Danish shipping giant Maersk has warned that just a week-long shutdown could take four to six weeks to recover, “with significant backlogs and delays worsening with each passing day.”

In an update released on Monday, Maersk said the disruption would likely lead to freight delays, higher costs and logistical challenges for companies that rely on ports on the US East Coast and the Gulf. A protracted labor dispute, the company added, could exacerbate these disruptions.

However, not everyone is as concerned about the broader economic impact of the U.S. port strikes.

Bradley Saunders, North America economist at Capital Economics, said in a research note published late last month that the strike action was unlikely to trigger major economic disruption because US President Joe Biden – despite previous denials – would have “little choice” to intervene to bring a law on reintegration into the labor market into force before the November elections.

Biden has said he will not use existing labor law to force union members to return to work, which is within his authority under the Taft-Hartley Act.

The Taft-Hartley Act, passed in 1947, was a revision of U.S. law governing labor relations and union activity that gave a U.S. president the authority to suspend a strike for an 80-day “cooling off period” if “the national health or safety.” “ is impaired “are at risk.

“Frequent supply chain shocks in recent years have left producers more attuned to the risks of inventory shortages,” Saunders said Sept. 25.

“It is therefore likely that companies have taken precautionary measures in the event of a strike – not least because the ILA has been touting the possibility for months,” he added.

—CNBC’s Lori Ann LaRocco contributed to this report.