On Tuesday, longshoremen on the East and Gulf coasts went on strike, halting the delivery of groceries, wine, and consumer goods to ports stretching from Maine to Texas. Supply chains, which have already been disrupted in anticipation of the strike, are likely to be roiled further if it drags on. (One vegetable importer told the Wall Street Journal that he was flying in 150,000 pounds of asparagus from Peru, at significantly higher cost, rather than risk it rotting in port.) An example: The ports handle around 75 percent of the seaborne wine and banana imports in the country. Fruit and cheaper wine that cycles through store shelves quickly are likely to be impacted in the first week or so, cars and semiconductors in the month(s) to come.
Members of the International Longshoremen’s Association union, the ILA, are striking for the first time in nearly 50 years over wage increases and further automation at ports, especially technologies introduced without union approval and job protections. The union is asking for 77 percent wage increases over six years and while there are some signs that they may reach an agreement soon, with workers and management coming closer on wage increases, there’s still a big gap (the biggest reported counteroffer so far has been a 50 percent increase). President Joe Biden has also said he won’t use the Taft-Hartley Act, a 1947 labor law, to break the strike.
What will the strike mean for those late-night Amazon purchases or your natural-wine habit? What has it already done? And how should consumers adjust their behavior — Governor Kathy Hochul has warned New Yorkers not to try to stockpile groceries — in response to the strike? To find out, we talked to Jason Miller, the Eli Broad professor in supply-chain management at Michigan State University.
Not much so far, but we’re only on day two. The degree of disruption increases rapidly with each additional day. Once we get past day three or four, we’ll have significant backlog at the ports. Right now, we have about 30 container ships waiting to be loaded or unloaded — a week from now it’s going to be 200. The worst backlog we’ve had recently was about 100 ships in 2022 because we had so many imports pouring in.
The vast majority of food we consume in this country is grown here and manufactured here. There are no concerns about rampant and systematic food shortages. If the strike goes on more than a week, certain perishable imported foods, like fruits and bananas, may be hard to get.
If you’re buying bananas on the East Coast, it’s going to come into an East Coast port, primarily Wilmington Delaware. Bananas primarily come from Guatemala — about 37 percent — then Ecuador and Costa Rica. They’re not going to get shipped to the West Coast and trucked to the East Coast. It would be too expensive. A rule of thumb is that importers pay about 25 cents per pound for bananas. A whole truck of bananas would be about a $10,000 value, and to truck them across the U.S. would cost around $8,000.
Some stuff will move by air, but those will be your higher-dollar-value goods. Pharmaceuticals or medicine. Higher-dollar-value mechanical parts.
There’s been an importer of asparagus saying they’re flying it in. That makes sense for asparagus — it’s one of the higher cost-per-pound vegetables — but not for a lot of other things.
Dates, figs, European wine. We get a lot of wine from Italy and France and you can’t put that wine on a plane. The cost per dollar doesn’t let you do that. But there is a lot of substitution possibility: We grow a ton of berries in the U.S., apples are mostly domestic. You can buy wine from California.
I don’t see this as being such an inflationary story because you can substitute. In 2021 and 2022, we had very strong demand, people had stimulus money, and that was interacting with shortages of goods. We don’t have a very strong demand environment right now.
If the strike continues, the production of motor vehicles. If you get about three weeks into the shutdown, you’re going to see shortages of certain types of imported parts that will primarily affect foreign automakers who operate plants in the Southeast — South Korean and German car companies.
Shortages will mostly affect workers, not consumers. Demand for cars is down, used-car prices are down, and the existing dealer supply is extensive, so there’s not much inflationary concern.
Furniture is the most imported category by far. But we have ample supplies of furniture in this country. It can be front-loaded — it’s not like we don’t know this is going to happen. Holiday goods, we knew this was going to happen, people don’t need to worry about Santa not coming this year. I find it interesting that both Walmart and Amazon have already distributed their Christmas catalogues. I think they must have all that in stock already because it would be a hell of a risk if they didn’t have the goods.
Both sides are very far apart and the container operators — the Maersks, MSCs — they don’t have motivation to resolve this quickly. These are global operators and they are getting paid everywhere else in the world. They’ve already said they’ll throw in surcharges after a certain date.
No. Don’t run to the stores and start buying stuff. There’s no reason to do that. We knew this was coming. It’s not like COVID. What gummed us up in 2021 or 2022 is that we had unprecedented demand volume for a year or two. This situation is temporary.
My view is that two weeks is the magic mark, at which point we will be digging ourselves out through January. If by the end of next week the two sides aren’t closer to a deal, I think the Taft-Hartley button gets pushed. There’s already pressure on the Biden administration to do that. Once you start to hear about layoffs at warehouses and auto plants. Or if it cascades to Michigan, which isn’t that dependent on foreign imports, but it’s the golden-screw problem: If you’re missing one part, you have to stop production.
Once we start getting to two weeks, you may not see the exact selection of European wines you want. But we’re not looking at chronic shortages affecting everyday life. We’re more worried about the industrial side of things, the impacts on U.S. manufacturing.
