On Tuesday, the International Longshoreman’s Association (ILA) went on strike against the U.S.’s East and Gulf Coast ports. 36 different ports have stopped work after almost 45,000 workers walked off the job. We have not seen a work stoppage at the ports of this magnitude since 1977. There does not appear to be an easy solution to this strike and the longer it goes, the more damage that will be done to the supply chain. Depending on the source, this strike could cost the U.S. anywhere from 1.2 billion a week to 4.5 billion a day. This strike occurring at any time would be devastating, yet we are one month away from a Presidential election and the conspicuous timing of this event cannot be ignored.

The ILA and United States Maritime Alliance (USMX) had a six-year contract that expired on Tuesday. There had been some optimism that a new deal would get done soon, before the strike occurred. The USMX requested an extension to the current contract in order to allow more time to hammer out a new deal. The ILA refused the proposal and union president, Harold Dagget, has said that the union was “prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes.” The union is striking over two key issues, they want a pay increase with stronger benefits, and they want protections against automation costing them jobs.

The Union is requesting a 77 percent pay increase and the last offer from the USMX was a 50 percent increase, which was later rejected. The reason for such a large increase in pay stems from West Coast dock workers who recently renegotiated their contracts. West Coast workers associated with the International Longshoremen and Warehouse Union (ILWU) now receive an average of $55 per hour compared to $39 per hour for their East Coast counterparts. While this large divide seems like the driving issue, it is automation that is causing the most difficulty during negotiations. Contract talks between the USMX and ILA broke down in June over the use of automation at a port in Mobile, AL.

The effects of this strike will be wide reaching, and we are already seeing damage to the supply chain. More than half of the goods we import through container ships come in through the docks that are now shut down and almost 70 percent of our exports sent through container ships use these same ports. A large number of those imports are perishable items like fruit and fish and will see the largest impact as there was no way to stock up on a surplus of these goods. In addition to the prices of these goods, we will likely see inflation begin to rise if the strike drags on for weeks.

Politically, this strike couldn’t come at a worse time for the Biden administration or the Harris campaign. President Biden can use the 1947 Taft-Hartley Act to end the strike for 80 days, yet he has already publicly said that he does not believe in the act, and he will not use it. Biden and Harris have strongly supported unions, and such a move would be blow to one of their core tenants. The weakening of the economy and rising inflation is also bad for the Harris campaign that is just over a month away from the election. Adding fuel to the political fire are pictures of Union president Harold Dagget and former President Trump together that have started circulating. In July Dagget asked for members to pray for Trump following the attempt on his life at a Pennsylvania rally. He also met with Trump in 2023 where Trump promised to support the ILA and back their opposition to automation. Presidential candidates often meet Union leaders and in 2020 the ILA put their support behind President Biden.

For businesses and consumers, the timing of this strike is also devastating. Businesses have been trying to win back consumer confidence ahead of a holiday season that they desperately need to be a success. November always brings big spending, yet the election this year is likely to cause some disruptions with normal spending patterns. High prices in every industry have caused consumers to be reluctant to spend and more price hikes due to shortages caused by this strike could be a disaster. Overpriced items with low stock will do no favors for companies this holiday season.

CSG will continue to monitor this strike and the effect it is having on the supply chain if it continues over the next few weeks. We will also monitor the political impact and how it could shape next month’s election.

Update:

In a shocking move the ILA has moved to postpone the strike until Jan. 15, 2025. The ILA and USMX have reached a tentative agreement on a new six-year contract. The two sides have extended their current contract through Jan. 15 in order to allow more time for the new deal to be negotiated. The tentative agreement would see ILA wages increase 61.5%, a significant step up from the USMX’s previous offer of 50%. The issue of automation is the main holdup on getting the new deal done.

The extension of the current deal between the ILA and USMX will provide immediate relief to a supply chain that was already starting to feel the effects of the strike just two days in. Bussineses and consumers can also breath a sigh of relief as shortages and price hikes for the holiday season are no longer in our immediate future. However, if the strike resumes early next year, this entire debacle will start anew.

Politically, things have shifted quite a bit with this new agreement. The ILA and USMX were trying to hammer out a six year deal with the unknown of who the president would be for four of those years. Now, they will know the outcome of the Presidential election before they finalize any deals. This is also a victory for Biden and Harris as the strain this strike would have put on the economy could have reflected poorly on the current administration with just a month to go before election day. It also keeps them from having to pick a side in the dispute which could anger their pro-union supporters or business and consumers who would be negatively affected by the strike.