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FOX Business correspondent Lydia Hu reports on a looming port strike and the potential economic backlash.
Dockworkers along the East and Gulf coasts have pledged to strike unless a new contract is reached by October, leaving officials with less than a week to devise a plan to prevent disruptions. Industry experts warn that a strike will significantly impact the U.S. economy and lead to higher prices for consumers.
In fact, some experts say prices could rise before year’s end, impacting goods during the critical holiday season.
The dire situation arose just as consumers were beginning to experience some relief from inflation.
POTENTIAL PORT STRIKES SEND RIPPLE EFFECTS THROUGH SUPPLY CHAIN, THREATEN INFLATION
The International Longshoremen’s Association (ILA) is negotiating on behalf of 45,000 dockworkers at three dozen U.S. ports from Maine to Texas that collectively handle about half of the country’s seaborne imports. It warned its members are prepared to stop work if they don’t have a new contract by the Oct. 1 deadline.
The Seamax Mystic container ship near the Port of New Orleans in New Orleans, Louisiana, U.S., on Thursday, March 3, 2022. (Photographer: Luke Sharrett/Bloomberg via Getty Images / Getty Images)
The Retail Industry Leaders Association (RILA) said in a statement that “retailers view this strike and its imminent disruption as a self-inflicted wound to the U.S. economy.”
JPMorgan estimated that for each day the ports are shut down, it will take roughly six days to clear the backlog. Analysts pegged the economic impact of a strike to about $5 billion per day, according to a research note published earlier this month.
PORT STRIKES COULD HAVE ‘DEVASTATING’ IMPACT TO ECONOMY, RETAIL TRADE GROUP SAYS
Even though retailers have made contingency plans to minimize its effects,”the longer a work stoppage goes on, the harder it will be to do so,” the RILA said.
Several experts have told FOX Business that this type of disruption in shipping and supply chains often leads to product shortages, which drives up prices.
A container ship is docked at the Port of Miami on December 27, 2012 in Miami, Florida. (Photo by Joe Raedle/Getty Images / Getty Images)
“If these strikes cause a rise in prices, it could push inflation higher, potentially delaying the Federal Reserve from cutting rates further,” Cody Moore, partner and wealth adviser of wealth management firm Wealth Enhancement & Prevention, told FOX Business. He added that “this delay could ultimately impact consumer costs for things like home mortgages, car loans and credit cards.”
SalSon Logistics CEO Jason Fisk told FOX Business that shoppers “should brace for a rise in prices for goods by the first quarter of 2025, or possibly even sooner.”
“Importers are actively implementing strategies to manage these risks, yet these solutions often come with their own high expenses, inevitably impacting consumer prices,” Fisk said.
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Discretionary products, particularly luxury items and recreational goods, are expected to be most affected due to their high price elasticity, according to Fisk.
Staff at an Amazon fulfillment center process orders. (Matt Cardy/Getty Images / Getty Images)
While the strike’s full impact remains unclear, Fisk says he is expecting “significant repercussions” such as “retail stockouts and plant slowdowns, especially as we approach the busy holiday season.”
Retail stockouts is an industry term for out-of-stock events, which is when a product is unavailable for purchase.
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