To describe the past several months in ocean shipping as bumpy would be an understatement. In October, the International Longshoremen’s Association (ILA) went on strike when it could not reach an agreement with the United States Maritime Alliance (USMX), the association representing their employers. The strike lasted four days until a tentative agreement was reached, with a second deadline set for mid-January.
Shortly after, our neighbors to the north experienced two strikes of their own, with port workers striking at both Montreal and Vancouver. Although these strikes were ultimately resolved, they contributed to increased transit times and costs for businesses operating in Canada’s three largest ports.
Now, the forecast for the next few weeks, and possibly months, of ocean shipping points to more rough seas ahead.
The current agreement between the ILA and USMX is set to expire on January 15. If no agreement is reached, we will see another strike like what we saw in October, which shut down ports from Maine to Texas. The two sides have not been able to find a middle ground on the topic of automation, with USMX pushing for some form of semi-automation to modernize ports and the ILA opposing any form of automation over concerns it will cause union members to lose their jobs. In a surprising move, after recently meeting with ILA leadership, incoming President Trump has bucked traditional Republican sentiment, making a strong statement in favor of the union, agreeing that automation can hurt American workers.
As discussed in a recent episode of ACD’s Chemline podcast, the likelihood of an agreement being reached does not look good. After just over a day of formal negotiations, the ILA walked away. With less than a month before the contract expires and the holiday season in between, the two sides are not formally negotiating, putting us on a collision course for a second strike.
The timing of this deadline is tricky for reasons beyond its alignment with the holiday season. If a strike were to occur, it would come with just five days left of President Biden’s term. Biden would have no leverage in any efforts to mediate a deal. And if it were to continue into Trump’s administration, he would be forced to navigate a supply chain crisis on day one of his term, before confirming any cabinet members or even picking out new drapes for the Oval Office. This scenario, which is increasingly likely, could result in a strike lasting weeks—a situation that would devastate the nation’s economy, which is ill-prepared for such a disruption. To prepare for this possibility, we have sent a letter to the heads of the ILA, USMX, and officials within the Biden and future Trump administrations requesting a 60-day extension of the agreement. We believe it is counterproductive to keep this unreachable January 15 deadline. It would only set us up for another supply chain crisis, causing crucial chemicals and other goods to dry up, putting our economy and public at risk. It’s in the best interest of everyone that the leaders of the ILA and USMX give the supply chain an early Christmas present and agree to an extension.
While the labor issue may garner the most attention, it is also important to recognize two other percolating factors: expected tariffs and the Lunar New Year. Both are expected to cause imports to rise sharply, as shippers seek to avoid any additional tariffs imposed by the incoming Trump Administration while also shoring up inventory before Chinese businesses and ports close for their New Year celebrations. This timing is concerning, as the Lunar New Year begins January 29, and tariffs are expected to take effect around February or March. This means both impacts could take hold during a Coast-wide labor strike, or the recovery of one.
This all serves as a reminder to pay attention to the factors at play in the supply chain. As we’ve been reminded over and over these past couple years, it is not as resilient as we’d like, and is subject to shocks that can upend the movement of goods into and out of the U.S. Still, we are continuing to do what we can to work with legislators and regulators to tackle these issues. In fact, we sent a letter to the Federal Maritime Commission supporting a project aimed at improving fluidity and visibility in ocean shipping. However, any meaningful change will take time, and it may be longer than we’d hope until we have smooth sailing in the supply chain.
To stay updated on the situation at the ports, visit our East and Gulf Coast Ports Strike webpage.
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