On October 1st, market analyst Jeff Cox wrote that the strikes attacking ports along the east coast of the United States and the Gulf of Mexico could drive up prices for food, autos, and many other consumer goods, but is expected to only cause limited widespread impact - as long as the strikes do not last too long.

The International Longshoremen's Association (ILA) is demanding a 61.5% pay increase, marking the first strike by port workers in nearly 50 years.

From a macro perspective, the impact of the strikes will depend on their duration. President Biden could intervene and order an 80-day cooling-off period, at least temporarily halting the strikes, but there is currently no indication that he will do so.

Chief Economist Joseph Brusuelas of RSM states that the strike actions by east coast and Gulf of Mexico port workers will cause a slight impact on the Gross Domestic Product. He estimates the weekly impact slightly higher than 0.1 percentage points of the Gross Domestic Product and $4.3 billion in import and export losses.

He added, "Given the current pace of the U.S. economy growing at 3%, we do not believe the strikes will alter the domestic economic growth trajectory, nor pose a risk of prematurely and unnecessarily ending the current economic expansion."

Economist John Donigian from Moody's states that the strikes by east coast port workers will impact various industries.

Some of the main challenged industries include coal, energy, and Shenzhen Agricultural Products Group. As a rule of thumb, it takes almost a week of time to bring the ports back to normal operational levels for each day of strike.

Citi economist Andrew Hollenhorst said: "With the increase in backlogs of exports and imports, the cost of strikes will gradually rise. For example, imported perishable products such as fresh fruits may experience shortages first. If the strike lasts for several days, shortages of certain production factors may eventually slow down production and lead to price increases for manufactured goods such as autos."

Obstacles in the supply chain could exacerbate inflation, while price pressures seem to have cooled down from the peak in mid-2022, when annual rates reached the highest level in over 40 years. The Maritime Association proposed a salary increase close to 50%, which is another factor that could reignite inflation, while wage pressures have subsided.

Christopher Ball, economics professor at Quinipiac University, said: "In the short term, if this situation lasts more than a few days, if it continues for more than a week...it will definitely drive up the prices of many goods and services. Strikes may lead to a short-term spike in prices, and I can easily see that this will significantly raise the prices of certain commodities."

He expects that the main areas affected will be food and autos, both of which have faced deflationary pressures in recent months. He added that small businesses near ports may also be adversely affected.

Taking all the above into account, if the strike continues to drive up US inflation, it may limit the extent of the Federal Reserve's next interest rate cut, or even lead to no rate cut. This could be a potential bullish catalyst for the USD, so investors need to pay attention to this.

USD daily chart.

At 10:30 on October 2nd Beijing time, the US Dollar Index reported 101.22.