Tens of thousands of dockworkers across numerous U.S. ports have begun an indefinite strike, which could cause major disruptions to trade and the economy, especially with the holiday shopping season and presidential election approaching. Members of the International Longshoremen’s Association (ILA) initiated the strike on Tuesday at 14 key ports along the east and gulf coasts, stopping container traffic from Maine to Texas. This strike is the first of its kind in almost five decades.

While President Joe Biden has the authority to pause the strike for 80 days to allow further negotiations, the White House has indicated that he has no plans to intervene at this stage.

The Cause of the Strike

Negotiations between the dockworkers’ union and the employers, represented by the U.S. Maritime Alliance (USMX), have been stalled for months. The current contract expired on Monday, leading to the strike. The main contention between the two sides is over a six-year master contract that covers around 25,000 port workers involved in container and roll-on/roll-off operations. USMX represents shipping companies, port associations, and marine terminal operators.

On Monday, USMX presented an updated offer, proposing a nearly 50% wage increase, tripled pension contributions, and improved healthcare benefits. Despite these concessions, Harold Daggett, the ILA union president, insists on more substantial pay hikes while also raising concerns over the threat of job loss due to automation.

USMX, in turn, accused the union of avoiding negotiations and filed a complaint with labor regulators, seeking to compel the ILA to return to the bargaining table. Under the previous contract, starting wages for dockworkers ranged from $20 to $39 per hour, depending on experience, and included additional benefits, such as bonuses tied to container trade volumes.

Daggett has advocated for a $5-per-hour wage increase each year over the six-year term of the new deal, which amounts to an estimated 10% annual raise. He argues that dockworkers deserve better pay in light of the shipping companies’ significant profits during the COVID-19 pandemic, while workers’ salaries were eroded by inflation. The union has also hinted that the strike could widen to involve more of its members, though exact figures remain unclear. While the ILA claims to represent over 85,000 individuals, it reported 47,000 active members in a recent filing to the Labor Department.

Goods Likely to Be Affected

One of the first sectors likely to feel the effects of the strike is time-sensitive imports, such as food. The ports impacted by the walkout handle about 14% of agricultural exports transported by sea, as well as over half of imports, including a large share of the U.S.’s banana and chocolate supplies. Other industries vulnerable to disruption include tin, tobacco, and nicotine, according to analysis by Oxford Economics. Clothing, footwear companies, and European car manufacturers—many of whom rely on the Port of Baltimore—are also at risk.

In anticipation of the strike, U.S. businesses ramped up imports over the summer to minimize the impact. However, the longer the strike continues, the more likely it is that prices will rise and shortages of certain goods will occur. Seth Harris, a labor expert at Northeastern University and former White House advisor, cautioned that while immediate economic impacts may not be severe, extended strike action could begin to affect consumer prices and goods availability.

Economic Implications of the Strike

More than one-third of the U.S.’s exports and imports could be disrupted by the strike, with economic losses estimated at around $4.5 billion per week, according to Grace Zemmer, a U.S. economist at Oxford Economics. Some estimates suggest the financial toll could be even higher. Zemmer also warned that over 100,000 people could find themselves temporarily unemployed as the effects of the strike ripple across the economy.

Peter Sand, chief analyst at Xeneta, a freight analytics firm, described the strike as a “trigger event” with the potential to cause widespread economic fallout over the coming months. He noted that shipping costs could increase as a result, putting additional pressure on businesses and consumers. Companies that rely on just-in-time supply chains, which minimize inventory to reduce costs, could be particularly vulnerable to the disruptions.

Political Ramifications Ahead of the Election

The strike introduces significant uncertainty into the U.S. economy at a sensitive time, with the presidential election just six weeks away. The U.S. economy has been showing signs of slowing down, and the unemployment rate has been creeping up. The strike puts President Biden in a difficult position, especially since U.S. presidents can intervene in labor disputes that pose risks to national security or public safety by imposing an 80-day cooling-off period. This option forces workers back to their jobs while negotiations continue.

In 2002, President George W. Bush used this power to reopen west coast ports after an 11-day strike by dockworkers. However, the Biden administration has so far resisted calls to intervene in this strike, even though the U.S. Chamber of Commerce, a leading business group, has urged the president to act. Suzanne P. Clark, the Chamber’s president and CEO, argued that it would be unacceptable for a contract dispute to cause economic shock similar to the supply chain backlogs experienced during the pandemic.

Daggett, the ILA president, endorsed Biden in the 2020 election but has since expressed disappointment with his handling of labor issues, especially regarding pressure on west coast dockworkers to settle a contract dispute last year. Daggett also met with former President Donald Trump in July, suggesting the possibility of a shift in his political allegiances.

Labor expert William Brucher from Rutgers University pointed out that while the strike could cause headaches for Democrats, alienating key labor allies just weeks before the election could be even more damaging. However, Brucher added that the public’s attitude toward the strike is unlikely to influence the ILA’s decision to walk out, as many Americans share the dockworkers’ concerns about the rising cost of living and the threat of job losses due to automation.

Brucher believes that the strike is more likely to push employers back to the negotiating table with a more substantial offer than to turn public opinion against the union. While movies like On the Waterfront once shaped the public’s image of dockworkers, Brucher noted that such historical memories have faded, and the broader public is more likely to sympathize with workers facing similar economic pressures.

In summary, the dockworkers’ strike at major U.S. ports threatens to significantly disrupt trade and the economy, with ripple effects that could affect industries from agriculture to car manufacturing. The strike also comes at a politically sensitive time, raising challenges for President Biden as he navigates labor issues ahead of the presidential election. Meanwhile, the ILA continues to press for significant wage increases and protections against automation, while the employers’ group, USMX, argues that they have already made a generous offer.