The International Longshoremen’s Association (ILA), which represents dockworkers along the
U.S. East Coast recently agreed on a new contract with the United States Maritime Alliance
(USMX), which represents the shipping industry on labor agreements. The agreement ended the
ILA’s work stoppage after just three days. But did the strike – and the build-up to it — impact the
logistics marketplace?
The Importance of East Coast Ports in Global Trade
The East Coast of the United States hosts some of the most crucial shipping ports in the country.
Ports like the Port of New York and New Jersey, the Port of Savannah, and the Port of Charleston
are essential entry points for goods entering the U.S. from Europe, Asia, and Latin America.
According to the U.S. Census Bureau, over 40% of the nation’s total containerized imports pass
through these ports.
As e-commerce and international trade have grown, the reliance on East Coast ports has
increased dramatically. The logistics networks in these regions include shipping lines, truckers,
railways, and warehouses. A disruption at the ports due to labor strikes can lead to a cascading
effect that impacts the entire logistics chain, from international suppliers to end consumers.
The ILA Strike
For the ILA, negotiations with the USMX have occasionally reached impasses, but this was the
first strike since 1977 for the union’s 47,000 members. The ILA was seeking better
compensation, health benefits and job security. Shipping companies aimed to control rising costs
in an increasingly competitive global market.
The risks of an ILA strike for East Coast logistics:
Port Congestion and Delays: When dockworkers go on strike, ships anchored offshore can
be forced to wait for extended periods to offload cargo. Port congestion can occur, causing
delays in goods moving from ship to warehouse. According to the Journal of Commerce,
even short disruptions can have lasting effects, creating a backlog of shipments that takes
weeks to clear.
Disruption to Supply Chains: Ports are integral links in global supply chains.
A strike at major East Coast ports can disrupt not only imports but also exports. A strike can delay
shipments, increase lead times, and cause businesses to seek alternative, often more costly,
transport routes.
Higher Shipping Costs: Logistics providers and shippers might reroute cargo to other ports to avoid the disruption.
However, these alternative routes are often longer and more
expensive, which in turn increases shipping costs for businesses. Rising shipping expenses
can trickle down to consumers in the form of higher prices on goods, as we saw in the
aftermath of the pandemic.
Increased Pressure on Warehousing and Transportation: During a strike, inventory can
accumulate at ports, waiting to be offloaded. This not only puts pressure on warehousing and
storage capacities but also strains transportation systems. The shortage of truck drivers in the
U.S. has been well-documented, and port disruptions exacerbate the challenge of finding
transportation for delayed shipments.
Immediate Effects of the Strike
It has been widely reported that many retailers have been shipping products early and building
up inventory in anticipation of a labor action. This was especially crucial for businesses whose
year depends on the critical holiday season – just weeks away. Those companies seem to have
averted disaster with the strike’s settlement.
A fair amount of shipping was also diverted to air transport and to the West Coast (operating
under a different union), which is expected to have some impact on the facilities and workers on
the Eastern ports that would typically handle the trade.
In all, economists estimated the strike cost the economy about $5 billion per day, although some
of that will be recouped. The worst was averted with a quick settlement. But, as with pandemic-
related disruptions, the labor action reminded us how vulnerable the complex global supply chain
is.