As the first day of the strike by dockworkers on the East Coast of the United States unfolds, economists are attempting to quantify the losses caused by supply chain disruptions due to the closure of every major maritime trade gateway from Boston to Houston: the estimated daily losses range from $1 billion to $5 billion.

Starting on October 1st local time, dockworkers on the East Coast and along the Gulf Coast of the United States began their first large-scale strike in nearly 50 years. After negotiations for a new labor contract broke down over wage issues, approximately half of the country's ocean-going transportation was forced to halt.

The authorities will not use their power to end the strike and exerted pressure on the employers of the dockworkers on the 1st, demanding that they increase their contract offers to reach an agreement. A person familiar with the negotiations said that both sides were in dialogue, but there were no active negotiations later that evening, and the strike would enter its second day.

U.S. shipping industry insiders do not believe the strike will end soon. Roger, who has been engaged in U.S. line transportation in California for many years, told reporters from First Financial Daily that shipping companies began to announce the suspension of export bookings one after another from earlier times, especially for export containers shipped by rail from the U.S. mainland, which have basically all stopped.

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He stated that there are not many contingency plans left for shipowners, and whether to change ports also depends on the judgment of the duration of the strike. If the strike ends in a few days, there is no need to change ports. If the final choice is to wait at anchor, once the docks reopen, it is expected that port authorities everywhere will arrange the order of unloading according to the handling method of the major port congestion event in 2021-2022.

He predicted, "The general consensus in the industry is that the impact of a one-week strike will take 4-6 weeks to recover. If unfortunately it lasts for two weeks or more, the negative impact will continue into next year."

The strike will result in billions of dollars in economic losses each day.

The International Longshoremen's Association (ILA), representing 45,000 port workers, has been negotiating with the U.S. Maritime Alliance (USMX) employer group for a new six-year contract, with negotiations ending at midnight on September 30th U.S. time.

On the eve of the strike, the plot continued to twist. First, USMX issued a statement saying that it could offer a 50% pay raise over six years but wanted to retain the automation clauses in the contract.

Subsequently, ILA issued a statement rejecting USMX's final offer, closing all ports from Maine to Texas at 12:01 a.m. Eastern Time on October 1st, and adding that USMX's proposal was "far from meeting the requirements for its members to approve a new contract."Harold Daggett, head of the International Longshoremen's Association (ILA), stated that employers such as container ship operators like Maersk have not provided appropriate wage increases and have not agreed to halt demands to stop port automation projects that threaten jobs.

This strike marks the ILA's first large-scale work stoppage since 1977, causing concern for businesses that rely on ocean transport to export goods or ensure vital imports.

Statistics indicate that the strike affects 36 ports, including New York, Baltimore, and Houston, which handle a range of containerized cargo from bananas and clothing to automobiles.

Roger explained that the commonly referred to "East Coast" actually represents the "East Coast and Gulf of Mexico," meaning that docks from the northernmost Boston to the southernmost Houston will be impacted. The East Coast and Gulf of Mexico ports handle approximately 500,000 twenty-foot equivalent units (TEUs) weekly, and the strike's impact is indeed substantial.

A data analysis by Bloomberg Economics shows that the strike could cost the U.S. Gross Domestic Product (GDP) up to $3 billion per day due to losses in spending and production. A week-long strike could potentially decrease the annualized GDP by 0.3 percentage points.

An analysis report from JPMorgan estimates that the strike could cost the U.S. economy $5 billion per day and also damage U.S. retail and supply chains.

John Wrenn, Chief Operating Officer of MHW Limited, a beer, wine, and spirits distributor headquartered in Manhasset, New York, expressed his concern about how to timely deliver products across the ocean during the holiday season while still making a profit.

Currently, the cost to ship a 40-foot container (FEU) from Europe to the U.S. is approximately $4,000 to $5,000, but peak season and strike-related surcharges have added another $1,500 to $2,000. In just a few weeks, shipping costs have increased by 30% to 40%.

Wrenn said that shipping goods into the U.S. via the West Coast does not seem feasible at the moment, and air freight is prohibitively expensive. "It won't be long before this situation snowballs, causing real damage to the holiday season."

A spokesperson for Walmart said that the company is prepared for supply chain disruptions and maintains additional sources of supply. Costco executives stated last week that they expect the strike to affect most of the company's imported non-food items. Non-food items account for about 25% of Costco's total business, and in order to ship holiday goods and some products before the strike, the company has already shipped them ahead of schedule.At the same time, for American car manufacturers who heavily rely on maritime transport, as well as other manufacturers who depend on foreign-made parts and export sales, they have initiated Plan B in hopes of avoiding widespread issues.

A spokesperson for Toyota Motor Corporation's U.S. operations stated on September 30th that the company is closely monitoring the situation and is brewing contingency plans to minimize the impact on car buyers and dealers. The automaker has prepared for a potential strike by building up additional inventory, but the spokesperson did not disclose the specific quantity.

A General Motors spokesperson, on the other hand, indicated that the company has formulated contingency plans and has been increasing its inventory of parts. Hyundai Motor Company, which has a factory in Alabama and relies on ports in Philadelphia and Georgia, had a spokesperson who said via email: "Our logistics subsidiary is closely monitoring labor conditions and is devising daily contingency measures to ensure the stable processing and delivery of Hyundai vehicles."

"Past experience has taught us that many impacts will only manifest months later, such as empty containers on the East Coast not being able to return to Asia in a timely manner," Roger explained. "The Spring Festival in 2025 is at the end of January, and the rush to ship goods before the holiday begins in December. Originally, ships departing from the East Coast in October with empty containers would be just in time for the December shipments. Will the strike causing a several-week gap in empty containers lead to a container shortage? If a large number of ships switch to the West Coast, will it significantly increase West Coast shipping costs? These are all unknowns."

Why does the White House lean towards the union?

Daggett stated on the 1st that he is prepared for a protracted struggle if necessary, no matter how long the strike lasts, "We will persist in the strike to obtain the wages and protection against automation that our members deserve."

He mentioned that the union is fighting for more pay raises, including an hourly raise of $5 per year over a six-year new contract.

USMX, in a statement, said: "The nearly 50% wage increase we are currently proposing exceeds all other recent union settlements, while also addressing inflation and recognizing the hard work of the ILA in maintaining the operation of the global economy."

It is noteworthy that the White House is also involved this time, stating that it is time for USMX to negotiate a fair contract for the workers.

White House Press Secretary Jean-Pierre stated: "Since the pandemic, shippers have reaped record profits, with some profits increasing by more than 800%."She stated that dockworkers took risks to keep ports open during the pandemic, and it is only fair that their wages have increased significantly.

Acting U.S. Secretary of Labor Julie Su said, "Both sides need to return to the negotiation table, and first and foremost, these shipping giants must acknowledge that if they can achieve record profits, their workers should also share in this economic success."

U.S. Secretary of Transportation Pete Buttigieg called on ocean carriers to revoke the surcharges that may be imposed after the strike. The USMX refused to comment on this matter.