• A port workers’ strike from Maine to Texas could deliver a major hit to the US economy.
  • The key to how much damage is done will be how long it lasts, logistics experts told BI.
  • A prolonged strike could lead to shortages of perishable goods and to higher prices.

A strike involving port workers from Maine to Texas could inflict major damage to the US economy.

How high the economic wreckage piles up will depend on how long dockworkers are on the picket lines, logistics experts told Business Insider.

A strike lasting a week or two would create backlogs but would carry minimal economic costs outside of areas that depend on port activity, according to Adam Kamins, an economist at Moody’s Analytics.

But “anything longer will lead to shortages and upward price pressures,” Kamins said. He noted that shipment of food and automobiles could take a big hit, in particular, because they tend to move through the affected ports where some 45,000 workers are striking for better wages, among other demands.

Kamins said a jump in inflation isn’t likely even with a longer strike. But he added that if prices start to heat up, that could make the Federal Reserve “more cautious” about trimming interest rates. The Fed lowered rates in September for the first time in four years following its effort to knock down price growth, which surged during the pandemic.

Kamins said hesitation by the Fed to continue cutting would cloud the forecast for job growth and investment.

Ports are already feeling the effects

The strike is the first to affect an entire US coast since 1977, and it’s already disrupting commerce. As of Tuesday morning, more than 38 container vessels were anchored near affected ports, including Savannah, Georgia, Charleston, South Carolina, Norfolk, Virginia, and New York, according to Mirko Woitzik, director of intelligence solutions at Everstream Analytics. That’s up from 21 on Monday and three on Sunday.

The affected ports involve about half of the nation’s ocean shipping. Analysts at JPMorgan have said the price tag for shutdowns related to the strike could reach $5 billion a day.

Travis Tokar, a professor of supply chain management at Texas Christian University’s Neeley School of Business, told BI that if a strike lasts more than a couple of days, there will likely be notable shortages at grocery stores.

“It all comes down to how quickly this ends up getting resolved,” Tokar said.

If the industrial action persists, he said, shoppers could soon face a harder time finding a variety of fruits and vegetables, including bananas and kiwis. He said meat, seafood, eggs, coffee, chocolate, and alcoholic beverages could also be affected. Beyond food, there could be delays involving automobiles, car parts, clothing, and furniture, Tokar said.

Spiking shipping costs could push up food prices

Tokar said that even if some foods remain available, consumers could notice a difference in costs as companies pass along higher shipping expenses.

“The prices will be very high as those shippers have to find alternate routes,” he said. “That’s going to add a lot of costs.”

One of the biggest hurdles for businesses will be even finding alternate routes. He said some things could be rerouted to West Coast ports, but that’s expensive and time-consuming. And alternate routes are likely to get busier as a result of the strike.

Sending goods by air would likely be, at minimum, about four times as expensive, Tokar said. That’s before any price hikes that might occur if too many businesses rush to claim limited cargo space. And going by air wouldn’t work for high volumes of freight, he said.

Tokar also said that many businesses and shippers might not have had the wherewithal to rejigger their supply lines before the walkout. Given that it’s been decades since a major strike unfolded on the East Coast, he said, many companies were also likely caught off guard.

Beyond that, he said, even if shippers had wanted to get ahead of a strike, they might not have had the funds available to purchase extra inventory ahead of time or a place to put it. Plus, shippers and companies can only store perishable goods for so long before they spoil.

“There’s just a limit to what companies can do even if they see the dumpster fire on the horizon,” Tokar said.