Q&A: How Soon Will You Feel the Impact of the Port Workers’ Strike?

A banana shortage? Toys not arriving in time for the holidays? Increased prices on goods?

These are all possibilities in the near future.

U.S. dock workers along the East and Gulf coasts, roughly 45,000 in all, began striking early Tuesday morning as the contract expired between the International Longshoremen’s Association and the U.S. Maritime Alliance, which represents the ports.

The first such work stoppage of its kind since 1977 marks a significant development in the transportation of goods and services with holiday shopping on the horizon.

To gauge the range of the strike’s impact, UVA Today turned to Vidya Mani, an associate professor at the University of Virginia’s Darden School of Business, whose areas of expertise include supply chain risk management and sustainable operations.

Professor Vidya Mani’s areas of expertise include supply chain risk management and sustainable operations.

Q. Why is this strike happening?

A. Rising inflation, more work to keep up with demand, a tightening labor market, and threat to jobs from AI and automation are some of the key factors. We have seen a rising trend among blue-collar workers, including autoworkers at car plants, machinists at Boeing, and the threat of strikes from railroad workers, cargo movers and truckers.

These are people essential to keep the supply chain moving, and threat of a strike right before the holiday rush is a leverage that has been effectively used in the past. Recent negotiations with autoworkers and the UPS workers have set an example that a strike can force the companies and government to the negotiating table for higher wages and other demands.

Q. What is its historic significance?

A. It’s happening after almost 50 years since the last strike. That’s historic. Given how critical ports are to keep the economy moving, we rarely see a strike happen. Usually, they come to the negotiating table and keep operations going. The timing of the strike, right before the holiday rush, the optics in terms of the presidential election, and the confounding geopolitical issues like stoppages of goods flowing through the Red Sea, the lower levels in the Panama Canal, make this one historic in nature.

It can turn into a perfect storm very quickly. We are relying on the West Coast ports to take up most of the flow, but that will add delays and backlogs to ports that are already operating at almost capacity in times of regular operations. And if the West Coast dockworkers join in, it will be almost like pandemic times.

While the government hasn’t stepped in yet to force both sides to the table, if this strike spreads, they absolutely will have to do so.

Q. Which industries does this affect most? What goods are impacted most?

A. Almost half of our basic goods come through these ports, including produce and goods like apparel and toys. More importantly, parts that feed into the factories all along the East Coast belt and shipments of finished products out from the country will be severely impacted. Things that are not perishable will pile up at the ports and roll off when the strike ends. There is only so much time a perishable item like fruits and vegetables can be kept fresh.

Q. How soon will the average consumer feel the impact of this strike?

A. In terms of food supplies, most stores will operate on very lean inventories. But there is a significant portion of local production that can help tide over shortages. You will not find the kiwi fruit that comes from New Zealand, but you will find peaches that are grown in Virginia.

We will see prices go up not just because of the strike, but also because of the spillover effects. With the Hurricane Helene disruption, there is going to be a loss of crops, houses and roadways that will affect the Southeast severely.

Stores around the country are going to see shortages and loss of supply. Available goods will automatically rise in prices because of that. Any diversion through the West Coast ports will add to both cost and time.

Inflation is just about stabilizing, so the high prices haven’t started to trend down yet. Even a couple of weeks of strike will mean short-term price surges, especially with food. For the holiday season, we may see some pre-buying of existing inventory, but that will be a drawn-out effect.

Q. Will it affect exports?

A. Yes, but not immediately. Factories like autos and other industrial goods will have a month or so of [components] inventory. They can continue production with existing inventory and raise it back up when the ports open.

The bigger problem will be to find truck and rail routes that will take the cargo out through the West Coast ports or through Mexico. This is going to add at least a week’s delay, and companies will need to absorb the added cost and time into their own accounts.

Q. What is the financial impact of this strike? How expensive could things get for companies and consumers?

A. That is a tricky question. Delays and financial impact tend to move in steps, alongside demand-supply dynamics. The first milestone to look for is if the strike can ease in a couple of weeks, or if there are exceptions to food and essential supplies. Will the government have an alternate plan in place to keep goods moving from other ports? If yes, then we would see moderate increases during this time, perhaps single-digit increases. If not and the strike lasts longer than a month, we will see some significant prices increases on basic goods, close to 20 to 30%.

Once we cross that threshold and get closer to Thanksgiving, we will see many more products, including discretionary items, go up in prices and a clamor to purchase. Expect a lot of delays in shipments, as the West Coast ports will already be operating at full capacity even without the reroutes.

This story originally appeared in UVA Today.