According to a news report from the Financial Association on January 2 (Editor: Liu Rui), as Donald Trump is about to officially take office on January 20, the port workers in the USA are preparing to present a "inauguration gift" to the incoming president—a large-scale strike at East Coast ports.

Trump is facing an "inauguration gift."

Recently, the International Longshoremen's Association (ILA)—a union with 47,000 members representing dock workers at major ports along the eastern USA and the Gulf Coast—has threatened to strike on January 15, seeking new "anti-Automation" protection measures.

In early October of this year, the International Longshoremen's Association conducted a three-day strike, which resulted in generous concessions from employers regarding wages.

However, the problem is that the union had only agreed to suspend the strike until mid-January—this means that a strike could still happen, as another point of contention besides wages remains unresolved: the threat of Automation.

Under the threat of Automation, dock workers face an increasing risk of unemployment. Therefore, the ILA hopes to secure stronger "anti-Automation" protections for workers—such as demanding that employers refrain from assigning some of their responsibilities to semi-automated equipment.

This strike will pose significant economic risks to the USA and put the soon-to-be-inaugurated president Trump in a political dilemma.

According to the Taft-Hartley Act, the President of the USA has the authority to end strikes and order unions to return to work.

However, given that the presidential inauguration in the USA will take place on January 20, if Trump directly intervenes to end the strike, it may create tricky political issues—because since winning the election, he has expressed support for labor associations in their fight against Automation Equipment.

A war against "Automation Equipment".

Currently, the International Longshoremen's Association is negotiating with the USA Maritime Alliance (USMX). USMX is an organization composed of shipping companies and dock operators, representing the employers of dock workers.

On the issue of opposing Automation Equipment, ILA President Harold Daggett has maintained a tough stance. He threatened to push the anti-port Automation Equipment movement globally by boycotting companies that install machines to replace labor—no matter which country these companies are in.

Harold's son Denny Daggett, who is his deputy at ILA, wrote on Facebook in early December last year, "This is a critical moment in our history."

However, for USMX, directly compromising with the union could also lead to long-term negative impacts on the operation of ports in the USA and even the USA economy. Some experts believe that if USMX agrees to sign a new six-year contract with the union that does not allow the use of Automation Equipment to increase capacity, the long-term competitiveness of USA ports would be affected.

How significant is the impact on shipping in the USA?

If a strike occurs, the most immediate impact would be that various shipping companies are likely to experience delays in goods and an increase in freight rates, some of which may be passed on to consumers in the USA in the form of higher prices.

On December 24th last year, German shipping giant Hapag-Lloyd warned its customers that due to the strike, the surcharge for a 20-foot container would be $850, and $1,700 for a 40-foot container.

If the strike lasts several weeks, many container companies will cancel sailings to avoid having their ships wait indefinitely outside the ports.

The system design of shipping companies lacks much flexibility: if a ship is delayed by a week in reaching the port, the return will also be delayed by a week. This ultimately tightens shipping capacity—this has always been an issue, especially as the Houthis have launched attacks in the Red Sea, forcing ships to reroute to southern Africa.

In the short term, reduced capacity may be a good thing for shippers, as it allows them to charge higher fees. However, in the long run, it will impact the stability of the global supply chain.

Most economists predict that if this strike in January lasts for less than a week or two, the impact may not be significant: although there will be delays in cargo transportation, the overall hit to the GDP of the USA will be negligible.

It is estimated that port strike activities will cause a daily loss to economic activity ranging from $1 billion to $5 billion—this is just a small part of the USA's $29 trillion economy.

However, if the strike lasts for more than several weeks, the situation becomes serious: the sustained shortage of parts and products will pressure industrial production and consumer confidence in the USA, and the impact on the GDP of the USA will begin to emerge. As indicated during the COVID-19 pandemic, once long-term supply disruptions occur, it often leads to businesses and households hoarding goods out of panic, further exacerbating the problem of shortages.