A Looming East Coast Port Strike Could Shake the Economy

Businesses are preparing for a strike by dockworkers on the East and Gulf Coasts, which could begin Oct. 1 if negotiations don’t yield a new contract.

With dockworkers on the East and Gulf Coasts threatening to strike on Oct. 1, businesses have been accelerating imports, redirecting cargo and pleading with the Biden administration to prevent a walkout.

Some importers started ordering Christmas goods four months earlier than usual to get them through the ports before a labor contract between the operators of port terminals and the International Longshoremen’s Association expires next Monday.

Many shipments have been diverted to West Coast ports, where dockworkers belong to a different union that agreed a new contract last year. The ports of Long Beach and Los Angeles say they are handling at least as many containers as they did during the pandemic shipping boom of 2021-22.

Despite those measures — and all the problem-solving skills that supply chain managers developed during the turbulence of recent years — a short strike could lead to significant disruptions. JPMorgan transportation analysts estimate that a strike could cost the economy $5 billion a day, or about 6 percent of gross domestic product, expressed daily. For each day the ports are shut down, the analysts said, it would take roughly six days to clear the backlog.

Chris Butler, the chief executive of the National Tree Company, which sells artificial Christmas trees and other decorations, said his company had brought in goods early and made greater use of West Coast ports. But he estimated that 15 percent of his goods would still be stranded by a port strike.

“I’m very unhappy,” said Mr. Butler, who is based in northern New Jersey. “We’re doing everything we can to mitigate it. But there’s only so much you can do when you’re at the mercy of these ports.”

Just over half of imported apparel, footwear and accessories come through East Coast ports, according to Stephen Lamar, the president of the American Apparel and Footwear Association. While his industry has made significant preparations for a strike, he said, “with logistics we should never be surprised when last-minute hurdles come along.”

Last week, scores of trade groups sent a letter to the Biden administration, imploring it to help forge a deal between the I.L.A. and the United States Maritime Alliance, a group of companies that move cargo at ports.

The alliance said on Monday that it had been unable to schedule a meeting with the I.L.A., adding that it had been contacted by the Federal Mediation and Conciliation Service, a government agency that helps management and unions negotiate labor contracts.

In its own statement on Monday, the union disputed the idea that it was refusing to negotiate and said the alliance was offering wage increases that were unacceptably low.

There hasn’t been a strike across all the East and Gulf Coast ports since 1977, when a walkout slammed some retailers ahead of the holidays.

Administration officials have said President Biden is not planning to force dockworkers back to work, which the 1947 Taft-Hartley Act authorizes him to do. Beth Rooney, director of the Port of New York and New Jersey, said last week that invoking the act would be “our best scenario next to there being a settlement.”

A strike would close huge container ports in New Jersey, Virginia, Georgia and Texas. It would include the Port of Baltimore, a big hub for the import and export of vehicles and heavy machinery that fully reopened in June after a container ship crashed into the Francis Scott Key Bridge in March. Significant food trade goes through the East and Gulf Coast ports, including a major share of orange juice imports through a facility in Newark. Facilities for cruise ships are likely to keep operating, officials said.

The I.L.A., which has over 47,000 members, and the Maritime Alliance have not met in person since June, when the union broke off talks over what it claimed was unauthorized use of labor-saving technology at a port in Mobile, Ala. And it wants to increase wages, which have been significantly eroded by the high inflation of the past few years.

East and Gulf Coast longshoremen with six or more years’ experience currently earn $39 per hour, up 11 percent since the start of their expiring six-year contract. Over the same period, inflation is 24 percent.

Neither the union nor management is making its wage proposal public, but The Journal of Commerce, a publication that focuses on trade, reported recently that the I.L.A. sought a $5-per-hour increase for each year of the contract’s six-year term, while management has proposed a $2.50-per-hour annual raise.

“My I.L.A. members are not going to accept these insulting offers that are a joke considering the work my I.L.A. longshore workers perform, and the billion-dollar profits the companies make off the backs of their labor,” Harold J. Daggett, the union’s president, said in a statement on Monday.

The I.L.A. declined to answer emailed questions. The alliance also declined to comment.

A vast majority of goods going in and out of the United States pass through marine ports, giving the two main dockworkers’ unions significant leverage, which they have used over the years to secure raises and, at some ports, lucrative pensions and other benefits.

West Coast longshore workers on average earned nearly $220,000 last year, according to management, and currently make nearly $55 an hour. At the Port of New York and New Jersey, nearly 60 percent of the longshoremen made $100,000 to $200,000 in the 12 months through June 2020, the latest figures available, according to data from an agency that helped oversee the port.

Some three-fifths of container shipments to the United States come through the East and Gulf Coasts, and logistics experts say there is no way that the West Coast ports could absorb all or even most of them if they were diverted.

Container volumes have been soaring on the West Coast, with the Port of Long Beach reporting its best month ever in August, when container imports surged 40 percent from a year earlier.

The danger is that the West Coast ports could get clogged as more shippers turn to them, causing delays and big increases in freight prices.

In an interview, Noel Hacegaba, chief operating officer at the Port of Long Beach, said the recent surge had been handled “without any of the backlogs, delays or congestion” that the port experienced in 2021 and 2022. He said that the port was operating at 73 percent of its capacity, and that nearby warehouses were not full.

But the time that containers wait at the port to be picked up by trucks and trains has increased recently, according to the Pacific Merchant Shipping Association, which represents the port terminal operators on the West Coast. Mr. Hacegaba said the waits currently average four to eight days. “That’s very good considering how many containers we’re handling,” he said.

The West Coast dockworkers, who are represented by the International Longshore and Warehouse Union, have agreed to allow port terminal operators to use automation, and the technology may be helping the Long Beach port handle the latest increase in traffic.

Long Beach Container Terminal, considered the most automated port terminal in the United States with its driverless vehicles and other equipment, achieved average annual growth in recent years that far exceeds that posted by other terminals within the port, according to data obtained by The Times through an open-records request.

Industry analysts also said there was still spare truck and rail capacity to move containers out of the West Coast ports and send them across the country.

But doing so can be prohibitively expensive. It can cost as much as $6,000 to ship a container of artificial Christmas trees from the West to the East Coast, Mr. Butler of the National Tree Company said. “It’s way too much,” he added, and while shipping by rail is a little cheaper, delivery times can be less certain, a risk he said he was unwilling to bear.