In a move that has brought relief to the U.S. economy, dockworkers have agreed to end a three-day strike that had paralyzed trade on the U.S. East and Gulf coasts. The International Longshoremen’s Association and the U.S. Maritime Alliance have extended their previous contract through January 15, allowing ports to reopen and negotiations for a long-term agreement to restart.
Impact on the Economy
The strike had sparked fears of a sustained emergency, with analysts and industry officials warning that the disruption would quickly extend beyond the container imports, exports, and autos directly impacted by the walkout. Estimates of the cost to the U.S. economy ranged from $3 billion to $5 billion a day.
Shares and Expectations
The suspension of the strike damped expectations that container rates would rise due to reduced capacity, causing shares of shipping lines in Asia to fall. Copenhagen-based A.P. Moller-Maersk A/S dropped as much as 8.6%, while Hapag-Lloyd AG of Hamburg, Germany, sank almost 14%.
Political Implications
The agreement neutralizes a potential political issue for the White House and the campaign of Vice President Kamala Harris. A prolonged strike would have forced her to confront a crisis that fueled inflation. It also spares President Joe Biden from having to put any public pressure on the ILA as he and Harris fight GOP nominee Donald Trump for the support of the union’s rank and file members.
Cargo Backlog and Port Operations
Even though the strike lasted just three days, the cargo backlog is likely to take over a month to clear, according to project44, a supply chain data company in Chicago. Port terminals began battening down the hatches days ahead, and it will take them a while to fully re-open. In the meantime, dozens of ships carrying containers and autos that anchored off the coast of major trade hubs may continue arriving faster than they can be unloaded.
Remaining Issues
While the ILA and USMX found common ground on wages, the remaining issues may prove to be thornier ones. ILA chief Harold Daggett has railed against the foreign-owned companies he says want to replace union jobs with robots, and says he won’t quit until language on technology in the next contract is tightened up. The companies have offered to leave it as is, which they see as a concession.
The resolution of the strike signifies a crucial moment in U.S. trade operations, marking a significant step towards stabilizing the economy amidst the ongoing election season.
