The strike by the International Longshoremen’s Association (ILA) union has blocked goods from food to automobile shipments across dozens of ports from Maine to Texas, a disruption that analysts warn will cost the economy billions of dollars a day.

More than 38 container vessels were already backed up at U.S. ports by Tuesday, compared with just three on Sunday before the strike, according to Everstream Analytics.

“Foreign ocean carriers have made record profits since the pandemic, when longshoremen put themselves at risk to keep ports open. It’s time those ocean carriers offered a strong and fair contract that reflects ILA workers’ contribution to our economy and to their record profits,” Biden said in a post on X late on Tuesday.

He directed his team to monitor for potential price gouging activity that benefits foreign ocean carriers, the White House said.

The ILA, which represents 45,000 port workers, launched its strike just after midnight on Tuesday after negotiations with the United States Maritime Alliance (USMX) for a new six-year contract collapsed.

USMX had offered the union a 50 per cent wage hike, but the ILA’s fiery leader, Harold Daggett, said the union is pushing for more, including a $5 per hour (C$6.74) raise for each year of the new six-year contract and an end to port automation projects that threaten union jobs.

“We are prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes, to get the wages and protections against automation our ILA members deserve,” Daggett said on Tuesday.

Hundreds of dockworkers demonstrated at a New York City area shipping terminal in Elizabeth, New Jersey, on Tuesday, carrying signs and shouting slogans like “ILA all the way!” as music blared and vendors hawked food.

Morgan Stanley economists said in a late Tuesday note that the strike could hit growth and raise inflation “but only if it is long-lasting,” noting that the implication for transport should be limited unless the strike lingers.

Retailers accounting for about half of all container shipping volume said they have been busily implementing backup plans to minimize the impact of the strike as they head into the winter holiday sales season.

Shares of shipper Maersk fell two per cent in Copenhagen on Wednesday, while ZIM Integrated Shipping dipped four per cent in pre-market action in New York.

Waterways crucial to trade

The strike, the ILA’s first major stoppage since 1977, is worrying businesses that rely on ocean shipping to export their wares or secure crucial imports. It affects 36 ports – including New York, Baltimore and Houston – that handle a range of containerized goods ranging from bananas to clothing to cars.

Roughly half of U.S. imports arrive via water, while 37 per cent of exports are waterborne, Morgan Stanley noted.

The walkout could cost the American economy roughly $5 billion (C$6.74 billion) a day, JP Morgan analysts estimate.

The National Retail Federation called on Biden’s administration to use its federal authority to halt the strike, saying the walkout could have “devastating consequences” for the economy.

Republicans, including Virginia Governor Glenn Youngkin, have also called on Biden to end the strike, warning of its effect on the economy. Biden has repeatedly said he will not do so.

The U.S. Department of Agriculture said on Tuesday it does not expect significant changes to food prices or availability in the near term.

— Additional reporting for Reuters by Gursimran Kaur, Nilutpal Timsina, Shivani Tanna and Shubham Kalia in Bengaluru and David Shepardson in Washington.

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The strike blocks everything from food to automobile shipments across dozens of ports from Maine to Texas, a disruption analysts warned will cost the economy billions of dollars a day, threaten jobs and potentially stoke inflation.

Still, President Joe Biden’s administration has indicated it will not use federal powers to end the strike, and on Tuesday pressured dockworker employers to bump up their contract offer to land a deal.

The International Longshoremen’s Association union, which represents 45,000 port workers, had been negotiating with the United States Maritime Alliance (USMX) employer group for a new six-year contract ahead of a midnight Monday deadline.

The ILA said in a statement it shut down all ports from Maine to Texas at 12:01 a.m. ET after rejecting USMX’s final proposal, adding the offer fell “far short of the demands of its members to ratify a new contract”.

The ILA’s leader, Harold Daggett, has said employers such as container ship operator Maersk and its APM Terminals North America have not offered appropriate pay increases or agreed to demands to stop port automation projects that threaten jobs.

“We are prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes, to get the wages and protections against automation our ILA members deserve,” Daggett said on Tuesday.

USMX said in a statement that: “Our current offer of a nearly 50 per cent wage increase exceeds every other recent union settlement, while addressing inflation and recognizing the ILA’s hard work to keep the global economy running.”

Daggett said the union is pushing for more, including a $5 per hour (C$6.75) raise for each year of the new six-year contract.

The White House weighed in, saying it was time for the USMX to negotiate a fair contract for workers.

“Shippers have made record profits since the pandemic, and in some case, have seen profits grow in excess of 800 per cent,” White House press secretary Karine Jean-Pierre said, referring to the COVID-19 pandemic that led to a boom in shipping demand.

“It’s only fair that workers who put themselves at risk during the pandemic to keep ports open see a meaningful increase in their wages, as well.”

Acting Secretary of Labour Julie Su said the employer group has “refused to put an offer on the table that reflects workers’ sacrifice and contributions to their employer’s profits.”

“The parties need to get back to the negotiating table, and that must begin with these giant shipping magnates acknowledging that if they can make record profits, their workers should share in that economic success,” she said.

The strike, the ILA’s first major stoppage since 1977, is worrying businesses that rely on ocean shipping to export their wares 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 to cars.

The walkout could cost the American economy roughly $5 billion a day (C$6.75 billion), JP Morgan analysts estimate.

French shipping group CMA CGM, the world’s third-largest container shipper, on Tuesday issued a force majeure notice over the strike, and said it may charge additional shipping fees for delayed vessels.

The National Retail Federation called on President Joe Biden’s administration to use its federal authority to halt the strike, saying the walkout could have “devastating consequences” for the economy.

Biden officials have repeatedly said the Democratic president will not do so.

The dispute is wedging labour-friendly Biden into a virtual no-win position, with Vice President Kamala Harris in a razor-thin race for the White House with Republican former President Donald Trump.

The U.S. Department of Agriculture said on Tuesday it does not expect significant changes to food prices or availability in the near term.

Grocery chain owner Ahold Delhaize also said it expected minimal short-term impact on its supply chain.

Backup plans

Hundreds of dockworkers demonstrated on Tuesday at a New York City area shipping terminal in Elizabeth, New Jersey, carrying signs and shouting slogans as music blared and vendors hawked food. Daggett arrived to rally them with cheers of “ILA all the way!”

“Everything that comes in this country comes from the containers off these ships that my men work. And I want the world to know it. Don’t come after us saying we’re greedy. Go after those greedy bastards that own these companies in Europe,” Daggett told reporters.

Retailers accounting for about half of all container shipping volume, along with other shippers, have been busily implementing backup plans to minimize the impact of the strike as they head into the winter holiday sales season.

Many of the big players rushed in Halloween and Christmas merchandise early to avoid any strike-related disruptions, incurring extra costs to ship and store those goods.

Retail behemoth Walmart, the largest U.S. container shipper, and membership warehouse club operator Costco say they are doing everything they can to mitigate any impact.

Danish drugmaker Novo Nordisk, meanwhile, said it has workaround plans in place to minimize or prevent any disruption to its production, including by using air freight, CNBC reported on Tuesday, citing a company spokesperson.

Lars Jensen, CEO of shipping consultancy Vespucci Maritime, said the strike is unlikely to lead to any critical shortages, but could raise costs for consumers if it is prolonged.

“At the end of the day, the only one who’s going to end up paying the bill for this is the U.S. consumer, simple as that, because import costs are going to rise and those costs are going to be passed on to all the imported products,” he said.

More than 38 container vessels were waiting at anchor near U.S. ports by Tuesday, compared with just three on Sunday, according to Everstream Analytics.

—Additional reporting for Reuters by Gursimran Kaur, Nilutpal Timsina, Shivani Tanna and Shubham Kalia in Bengaluru, David Shepardson in Washington, Stine Jacobsen in Copenhagen, and Gianluca Lo Nostro in Gdansk.

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