An inflationary impact could result from a port strike, with the severity of the consequences determined by the duration of the strike.

• The strike at ports on the East and Gulf coasts may increase the prices of various consumer goods, including food and autos, but it is predicted to have only minimal broader effects.
• Industries such as coal, energy, and agricultural products are facing challenges.
• A strike could potentially cause harm, but there may be ways to mitigate the damage.
• Some freight business that would typically go to eastern ports is expected to be taken on by West Coast ports. Additionally, some companies have proactively stockpiled in anticipation of the stoppage.

If the strike continues, it could increase the prices of various consumer goods, including food and autos, but it is predicted to have only minor effects on the broader economy, as long as it doesn't last for an extended period.

The International Longshoreman's Association has halted operations at major Eastern container and cargo ports, posing challenges for manufacturers of various products including trucks, toys, and artificial Christmas trees.

The Taft-Hartley Act grants President Joe Biden the power to order an 80-day cooling off period to halt the stoppage, but there is no indication that he will use this power.

The union and the U.S. Maritime Alliance are hoping that the strike will not continue and cause more difficulties for the U.S. economy during the holiday shipping season.

Port workers' labor action on the East and Gulf coast of the US will have a slight impact on GDP, according to RSM chief economist Joseph Brusuelas, who estimated the weekly effect to be around 0.1 percentage point of GDP and $4.3 billion in lost imports and exports.

The American economy is currently growing at a rate of 3%, and we do not anticipate the strike will disrupt this trajectory or end the current economic expansion prematurely, he stated.

The $29 trillion U.S. economy has avoided several obstacles and has been expanding for the past two years. The Atlanta Federal Reserve reports that the third-quarter growth rate is 3.1%, driven by an increase in net exports.

A prolonged work stoppage, though, could threaten that.

Impacted areas

The main industries facing challenges are coal, energy, and agricultural products. A common rule of thumb is that for every strike day, it takes approximately a week to restore normal port operations.

"If the strike continues, the costs will increase over time due to growing backlogs of exports and imports, and perishable products like imported fresh fruit may be the first to run out of supply. If the strike lasts longer, shortages of production inputs could eventually slow down manufacturing and increase prices for goods like cars."

A strike could potentially cause harm, but there may be ways to mitigate the damage.

Some companies have stockpiled ahead of time in anticipation of the stoppage at eastern ports, while West Coast ports are expected to take on some of the freight business that would normally go to the eastern ports.

The pressure on supply chains, which intensified during the pandemic, has now decreased and is lower than before Covid, according to a New York Fed measure.

"According to Bradley Saunders, North America economist at Capital Economics, fears about the potential economic impacts are exaggerated. Recent shocks to supply chains have made producers more aware of the risks of running low inventories. As a result, firms are likely to have taken precautionary measures in case of a strike, as the possibility has been discussed by the ILA for months."

Despite the administration's pro-union stance, there's a possibility that the White House could intervene and impose a cooling-off period.

He stated that there is minimal possibility that the administration would jeopardize its recent economic achievements, which could negatively impact their chances of winning the upcoming election, only two months away.

Inflation threat

There are other issues that could make things more complicated.

Inflation could be exacerbated by snags in the supply chain, as well as proposed raises of up to 50% by the maritime association and demands for larger increases and anti-automation guarantees by the union.

"Christopher Ball, an economics professor at Quinnipiac University, stated that the strike is temporary and will have some resolution. However, if it persists beyond a few days or a week, it will increase the prices of goods and services in the short run. This could lead to price spikes during the strike, and it is possible that certain goods will experience significant price increases."

Food and vehicles are expected to be the main areas impacted by either disinflationary or deflationary pressures in recent months, according to Ball. Additionally, small businesses near the ports may also experience adverse impacts.

Ball stated that if the shortages last for a week or two, businesses will have to increase their prices to prevent broader shortages of those goods.

The Federal Reserve's decision to cut its benchmark borrowing rate by half a percentage point and signal more easing is happening at an inconvenient time.

The October jobs report, which is the final one the Fed will review before its November 6-7 policy meeting, will be affected by both strike-related layoffs and those caused by Hurricane Helene.

The upcoming presidential election on Nov. 5 will have a significant impact on the economy.

Jim Bianco, head of Bianco Research, stated on CNBC that this would make everything more complicated for the Fed as they cannot accurately read the economy's performance.

On Monday, Jerome Powell, the Fed Chair, stated that he anticipates the Fed to lower rates by 0.5 percentage point by the year's end, which is slower than markets had predicted.