Author: Corey Ray, Senior Manager, Operational Resilience
This summer, Interos alerted customers to the threat of labor strikes by various global unions that posed risk to the international movement of goods. These risks included actions by Canada’s freight rail workers, Canadian border services officers, and Indian port workers. Although more minor in scale, as of publication grain terminal workers at the Port of Vancouver are currently striking in an action that hinders agricultural exports while Boeing workers at U.S. West Coast factories remain on strike.
We are now less than two days away from a far more significant disruption to the flow of global trade as reports suggest negotiations to prevent a strike on October 1st by the International Longshoremen’s Association (ILA) at East and Gulf Coast ports are unlikely to break the impasse.
Adding to the poor outlook for averting a shutdown of ports, Biden administration officials have yet to employ powers under the 1947 Taft-Harley Act to force workers to remain on the job during arbitration despite growing calls to exercise executive authority.
The disruption would be far-reaching in scope as the ILA represents workers at major ports including the Ports of New York, New Jersey, Savannah, Houston, Charleston and Miami that combined account for 40% of goods shipped to and from the U.S.
ILA Strike: A Magnitude Unknown
There is little precedent for an ILA action of this magnitude. The last full strike by the union was in 1977, before the era of globalization when the U.S. imported only $151 billion in goods annually. That figure pales in comparison to the $345.4 billion imported in July of this year alone. Despite an 11-day port lockout in 2002 and ILA strike threats more recently, the impact of a shutdown of East and Gulf coast ports does not have a complete historical analogue that can guide businesses, especially if the strike persists for weeks.
Global Implications of the ILA Strike
According to Interos data, there are over 67 million trade records at the top ports alone, impacting more than 200,000 domestic companies that would be at risk of disruption from missed imports. These, in turn, are sourcing from approximately 74,000 foreign suppliers providing more than 5,684 different product types. The scope of impact is broad and would leave very few sectors of the economy untouched.
Interos data further identifies more than 1,300 industries at risk of disruption due to sourcing goods through potentially impacted ports. The top 10 industries are highlighted below.
The manufacturing sector would be disproportionately affected and at risk of cost pressures, just as prices for domestic producers have finally cooled from inflationary pressures.
Consumer Retail Goods to Be at Risk Ahead of Holiday Shopping Surge
Leveraging proprietary Interos product category data, the table below highlights the top 10 most common product categories received by US entities specifically through the impacted ports on the U.S. East and Gulf Coast in the last five years. This data is also specific to goods imported in the month of October to reflect potential seasonality in impacted goods during an October 2024 ILA Strike. October also often sees a surge of imports ahead of the holiday shopping season.
Overall impact is concentrated on consumer retail, medical supplies, automotive, and unfinished manufacturing goods.
Note “NOS” stands for Not Otherwise Specified and is used across product category taxonomies.
Threat to Economic Normalization:
Global trade, and the post-Covid economic recovery, are already under threat from both trade wars and kinetic wars on multiple continents. Additional threats to global trade range from Houthi attacks on shipping in the Red Sea to drought-induced reductions on Panama Canal shipping traffic.
Within that context, the potential strike comes at a time in which global trade is under strain and thus puts a brief period of economic normalization at risk as U.S. inflation cools.
Port shutdowns would represent a classic supply-side shock to the economy, raising costs as the Federal Reserve is actively shifting away from its anti-inflation fight.
Businesses should expect price increases on impacted goods and extended lead times.
Meanwhile, congestion and cost increases should be expected on alternate shipping methods such as air freight and West Coast ports.
If the strike persists for days or weeks, upstream supply chains will come under strain including Chinese exports, which already face additional catastrophic risk from Typhoon Bebinca.
The impact of the ILA strikes will be far-reaching. It is vital businesses have a plan in place and the ability to monitor if any of their direct or indirect suppliers stand to be affected. Anticipation and speed are the key to averting a costly disruption.
Get Ahead of Future Labor Strikes with Interos:
Interos’ continuous monitoring alerts quickly identify the potential impact of disruptions across their extended supply chain. This visibility empowers companies to get ahead of potential disruptions both upstream and downstream in their supply chain.
For example, Interos users were alerted to previous trade disruptions such as the recent Red Sea attacks as well as cascading global factory disruptions impacting everything from German chemical facilities to European automotive plants at Tesla, Suzuki and Volvo.
For a more detailed analysis of the potential impact of recent labor strikes, such as those in Canada and India, download our report below, or speak to an expert today.