This is how badly the port strike could wreck the US economy

• A port workers’ strike from Maine to Texas could deliver a major hit to the US economy.
• Logistics experts told BI that the key to how much damage is done will be how long it lasts.
• 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 on the US economy.

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

Adam Kamins, an economist at Moody’s Analytics, said a strike lasting a week or two would create backlogs but have minimal economic costs outside of areas that depend on port activity. But “anything longer will lead to shortages and upward price pressures,” Kamins said.

He added that shipments of food and automobiles could take a big hit 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 that surged during the pandemic.

Kamins argued that 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. Mirko Woitzik, the director of intelligence solutions at Everstream Analytics, said that 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. 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 the strike lasts more than a couple of days, there could 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 have a harder time finding a variety of vegetables and fruits, including bananas and kiwis. He said meat, seafood, eggs, coffee, chocolate, and alcoholic beverages could also be affected. Beyond food, Tokar said, there could be delays involving automobiles, car parts, clothing, and furniture.

Spiking shipping costs could push up food prices

Tokar said that even if some foods remain available, consumers could notice cost differences 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 that while some things could be rerouted to West Coast ports, that’s expensive and time-consuming. And alternate routes are likely to get busier as a result of the strike.

Tokar said that sending goods by air would likely be at least about four times as expensive. 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 large volumes of freight, he said.

Tokar also said 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 store perishable goods for only 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.