U.S. East Coast and Gulf Coast dockworkers began their first large-scale strike in nearly 50 years on Tuesday, halting the flow of about half the country's ocean shipping, after negotiations for a new labor contract broke down over wages.
The strike blocks everything from food to automobile shipments across dozens of ports from Maine to Texas, a disruption analysts warned will cost the economy billions of dollars a day, threaten jobs and potentially stoke inflation.
Still, President Joe Biden's administration has indicated it will not use federal powers to end the strike, and on Tuesday pressured dockworker employers to bump up their contract offer to land a deal.
The International Longshoremen's Association union, which represents 45,000 port workers, had been negotiating with the United States Maritime Alliance (USMX) employer group for a new six-year contract ahead of a midnight Monday deadline.
The ILA said in a statement it shut down all ports from Maine to Texas at 12:01 a.m. ET (0401 GMT) after rejecting USMX's final proposal, adding the offer fell "far short of the demands of its members to ratify a new contract."
The ILA's leader, Harold Daggett, has said employers such as container ship operator Maersk and its APM Terminals North America have not offered appropriate pay increases or agreed to demands to stop port automation projects that threaten jobs.
'FIGHT AS LONG AS NECESSARY'
"We are prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes, to get the wages and protections against automation our ILA members deserve," Daggett said on Tuesday.
USMX said in a statement that: "Our current offer of a nearly 50% wage increase exceeds every other recent union settlement, while addressing inflation and recognizing the ILA’s hard work to keep the global economy running."
Daggett said the union is pushing for more, including a $5 per hour raise for each year of the new six-year contract.
The White House weighed in, saying it was time for the USMX to negotiate a fair contract for workers.
"Shippers have made record profits since the pandemic, and in some case, have seen profits grow in excess of 800%," White House press secretary Karine Jean-Pierre said, referring to the COVID-19 pandemic that led to a boom in shipping demand.
"It's only fair that workers who put themselves at risk during the pandemic to keep ports open see a meaningful increase in their wages, as well."
Acting Secretary of Labor Julie Su said the employer group has "refused to put an offer on the table that reflects workers’ sacrifice and contributions to their employer’s profits."
"The parties need to get back to the negotiating table, and that must begin with these giant shipping magnates acknowledging that if they can make record profits, their workers should share in that economic success," she said.
The strike, the ILA's first major stoppage since 1977, is worrying businesses that rely on ocean shipping to export their wares or secure crucial imports. It affects 36 ports —including New York, Baltimore and Houston — that handle a range of containerized goods from bananas to clothing to cars.
The walkout could cost the American economy roughly $5 billion a day, JP Morgan analysts estimate.
French shipping group CMA CGM, the world's third-largest container shipper, on Tuesday issued a force majeure notice over the strike, and said it may charge additional shipping fees for delayed vessels.
The National Retail Federation called on President Joe Biden's administration to use its federal authority to halt the strike, saying the walkout could have "devastating consequences" for the economy.
Biden officials have repeatedly said the Democratic president will not do so.
The dispute is wedging labor-friendly Biden into a virtual no-win position, with Vice President Kamala Harris in a razor-thin race for the White House with Republican former President Donald Trump.
The U.S. Department of Agriculture said on Tuesday it does not expect significant changes to food prices or availability in the near term.</p> <p>Grocery chain owner Ahold Delhaize also said it expected minimal short-term impact on its supply chain.
BACKUP PLANS
Hundreds of dockworkers demonstrated on Tuesday at a New York City area shipping terminal in Elizabeth, New Jersey, carrying signs and shouting slogans as music blared and vendors hawked food. Daggett arrived to rally them with cheers of "ILA all the way!"
"Everything that comes in this country comes from the containers off these ships that my men work. And I want the world to know it. Don't come after us saying we're greedy. Go after those greedy bastards that own these companies in Europe," Daggett told reporters.
Retailers accounting for about half of all container shipping volume, along with other shippers, have been busily implementing backup plans to minimize the impact of the strike as they head into the winter holiday sales season.
Many of the big players rushed in Halloween and Christmas merchandise early to avoid any strike-related disruptions, incurring extra costs to ship and store those goods.
Retail behemoth Walmart, the largest U.S. container shipper, and membership warehouse club operator Costco say they are doing everything they can to mitigate any impact.
Danish drugmaker Novo Nordisk, meanwhile, said it has workaround plans in place to minimize or prevent any disruption to its production, including by using air freight, CNBC reported on Tuesday, citing a company spokesperson.
Lars Jensen, CEO of shipping consultancy Vespucci Maritime, said the strike is unlikely to lead to any critical shortages, but could raise costs for consumers if it is prolonged.
"At the end of the day, the only one who's going to end up paying the bill for this is the U.S. consumer, simple as that, because import costs are going to rise and those costs are going to be passed on to all the imported products," he said.
More than 38 container vessels were waiting at anchor near U.S. ports by Tuesday, compared with just three on Sunday, according to Everstream Analytics.