How the port strike will impact the US economy

Approximately 45,000 US dockworkers are on strike following the failure of contract negotiations between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX). The deadline for reaching an agreement passed on September 30, triggering the work stoppage. This strike is now affecting operations at 36 ports along the East and Gulf coasts, spanning from Maine to Texas.

Yahoo Finance anchor Madison Mills breaks down the situation, exploring the potential economic ramifications of this strike and how the work stoppage could affect consumer goods availability.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Angel Smith

Video transcript

Thousands of dock workers from Maine to Texas are on strike.

The big question.

How much pain could this cause for the economy and for companies?

For more on this, we bring in catalysts.

Co anchor Madison Mills at the Wi Fi Interactive Hey, Madison!

Hey, Brad.

So let's talk about the economic impact here, as you guys have been covering throughout the programme here estimates for that economic impact.

They're really all over the place, right?

We've got JP.

Morgan in the billions in terms of impact for the day.

But then, on the other flip side of things, you've got Wells Fargo with a note saying Quote, Don't panic.

And they point to this behind me as the reason why you shouldn't be panicking.

Because purchasing managers have known about that pending deadline of October 1st, and they've been increasing their purchases heading into October.

You can see just at the end of your screen here that uptick in purchases, and I want to point out that number 6% increase from the beginning of the year through July in terms of purchasing managers importing goods into the states ahead of that deadline.

So they knew this strike was coming, right?

So there is a little bit of kind of preparation baked in here that could be protective.

But having said that, I want to point out the companies that stand to have the biggest impact here.

You're looking at Walmart at the very top here.

Why do they have the biggest impact?

Remember, this is the largest grocer in the United States.

We know that bananas, for example, 75% of our bananas guys coming in through these ports.

That is, of course, going to have a huge impact on a company like Walmart.

If you look a little further down here, Home Depot, Amazon they are likely to have less of the brunt of the impact because those non perishable goods can be warehoused, at least for the first couple of months.

Of course, there are costs associated with that as well.

So if the strike does go on, that could lead to inflationary pressures.

I do want to point out here that there is this big question about whether or not we are going to see the costs for these retailers trickle down to consumers and reignite inflation.

We do have one potential example to look back to as an indication of what we could see in the future here that GM strike last year, the Federal Reserve found almost no impact to the cost of vehicles.

So that could be an indication that so long as this strike doesn't go on for months and months and months here, of course, that's a big question.

We could see the brunt of the blunt of this, uh, really kind of stalled at these ports because of the way that these companies and purchasing managers have already hedged against any potential impact of the port closures due to these strikes, you guys.