A port strike set to begin across US ports in just hours could cost the American economy between $300m and $5bn per day, according to analysts.
The wide-ranging estimates come as a looming port strike is poised to start as soon as midnight on the US East Coast and Gulf Coast.
That is because a contract between the International Longshoremen’s Association and employers group United States Maritime Alliance expires Monday night amid an impasse over wages and port automation.
The contract covers container and vehicle terminals on the US East Coast and Gulf Coast.
The Conference Board, a US think tank, said on Monday that a one-week strike would cost the US economy $3.78bn, or about $540m per day, as vehicle and container terminals at 36 ports shut down just hours from now.
Erin McLaughlin, senior economist at the think tank, said a strike would paralyse US trade and hike prices just as Americans are starting to feel the impact of easing inflation.
“There’s no easy Plan B,” she said. “While shippers have already begun diverting some cargo to the US West Coast, capacity for such alternative options are limited.”
The Conference Board said the strike is set to take place at a key time, pushing retailers to scramble to finish importing inventory before the busy holiday shopping season.
And even a short disruption could reverberate through the supply chain for weeks, with a seven-day strike causing slowdowns through mid-November.
Biden stays out
The Biden Administration has already ruled out intervening, despite having the power to ask a court for a back-to-work order. But it is election season, which The Conference Board said makes for complex political calculus.
Consulting firm Anderson Economic Group estimated that a one-week dockworkers strike could deliver a $2.1bn blow, which equates to about $300m per day.
“The impact will not reach the average American right away due to advance planning and the diversion of shipments to US West Coast ports, which will absorb a substantial portion of goods that would normally flow through the busier container import and export hubs in the east and south,” the group said.
“While other estimates put losses to the US economy at billions of dollars per day, the experts at Anderson Economic Group note that a strike at a port delays trade, but does not destroy it.”
Patrick Anderson, the chief executive of the public policy and business valuation-focused consulting firm, said the strike would affect a significant share of trade moving into the US.
“But a short strike will not hurt most consumers,” he said.
“Shippers have been anticipating this strike for months, and we expect retailers and their customers to avoid much of the potential costs of a disruption by substituting for available supplies.”
Anderson said the economic impact will most likely look like strikes in 2002, when port workers lost wages but the impact on the economy was modest.
The National Retail Federation and National Association of Manufacturers, which have urged US President Joe Biden to help avert a strike, said it could cost $2bn per day.
Bigger impact
But others have given even higher estimates.
Lars Jensen, chief executive of container shipping consultancy Vespucci Maritime, told the recent Intermodal Association of North America’s Intermodal EXPO in Long Beach, California, that a strike could cost $5bn per day, according to investment bank JP Morgan.
Many news reports had attributed the $5bn per day figure to the investment bank.
But Brian Ossenbeck, a transportation analyst for the bank, said in a note to clients that JP Morgan estimated an impact of $3.8bn to $4.5bn per day, some of which would be recovered as the disruption unwinds.
He wrote that a strike lasting more than a week would be a surprise, even though US President Joe Biden has said he would not intervene.
“We believe the economic impact of a disruption would be too big to ignore for much more than a week given the economy and inflation are key issues in the heavily contested election,” he wrote.
