Roughly 45,000 dockworkers at every major East and Gulf coast port are girding to strike starting early next week, threatening to close trade gateways that handle about half of all goods shipped in containers in and out of the U.S.

Negotiations between the union representing dockworkers and a shipping industry group representing terminal operators and ocean carriers have been stalled for months, with both sides this week issuing conflicting statements about their willingness to bargain.

Experts say a shutdown could severely hamper the flow of goods and raise shipping costs. Any spike in such expenses could be passed on to consumers just as U.S. inflation normalizes, and even potentially hinder the Federal Reserve as it finally pivots to lowering interest rates.

Here’s what to know about the labor fight, which would be the first mass work stoppage at eastern ports in nearly half a century.

What are the key issues in the labor dispute?

The union representing dockworkers, the International Longshoremen’s Association (ILA), is threatening to strike at 36 U.S. ports if a new labor deal with the United States Maritime Alliance (USMX) isn’t reached before the current contract expires at midnight on September 30. A walkout would be the first East Coast dock strike since 1977. 

Union workers at ports in the East Coast and Gulf Coast earn a base wage of $39 an hour after six years on the job. That is significantly less than their unionized West Coast peers, who make $54.85 an hour — a rate that will increase to $60.85 in 2027, excluding overtime and benefits. 

Assuming a 40-hour workweek, West Coast port workers are making more than $116,000 a year, versus $81,000 for their counterparts in the East. The ILA’s initial demands included a 77% wage hike over six-year contract, with the labor group arguing that the increased pay would make up for the surge in U.S. inflation in recent years. 

The USMX in August offered what it called an “industry leading” pay hike, but the sides remain far apart. 

“Mark my words, we’ll shut them down October 1 if we don’t get the kind of wages we deserve,” Harold Daggett, president of the ILA, said earlier in the month. 

Yet the differences are not only over pay. To protect job security, the ILA is demanding a complete ban on the automation of cranes, gates and container movements used in the loading or unloading of cargo at the 36 ports. 

The Maritime Alliance said it offered to maintain provisions in the current contract barring fully automated terminals, while also banning use of semi-automated equipment in a new labor agreement. 

Unable to bridge the divide, the ILA in June suspended negotiations with USMX, saying the use of automated gates to let trucks enter ports without ILA labor violated its existing labor agreement. 

What impact could a strike have?

The ports that could close in a strike handle more than 68% of all containerized exports in the U.S. and roughly 56% of containerized imports, according to industry data. So even a short strike would cause significant disruptions in regional trade flows. One analysis estimated that could cost the U.S. economy as much $5 billion a day.

For example, heavier vehicle traffic is likely at key points around the nation as freight is diverted to West Coast ports. For every day of a port strike, it would take four to six days to catch up with the backlog in ships, analysts say. Although West Coast terminals could absorb some cargo diverted from eastern ports, they couldn’t handle it all, nor could the U.S. rail system, experts say.

Should a strike persist longer than a month or so, some companies could face shortages of parts and other inputs. The auto and pharmaceutical industries, which maintain lean inventories, could be particularly affected. Exports of cars and other products that are moved through the East Coast could be impacted. 

In addition, a strike could hamper shipments of products such as bananas, manufacturing components and plywood, interrupting the flow both of consumer goods and industrial parts for factories. Fresh meat and other refrigerated food could spoil, resulting in shortages and increased prices.

“I think everyone’s a bit nervous about it,” said Mia Ginter, director of North America ocean shipping for C.H. Robinson, a logistics company. “The rhetoric this time with the ILA is at a level we haven’t seen before.” 

How are companies preparing?

By contrast, consumers probably wouldn’t notice shortages of store goods during the holiday shopping season, as most products are already housed in warehouses after being transported ahead.

Jonathan Chappel, senior managing director of transportation at Evercore ISI, an investment research firm, said a strike would not mean “Santa’s not showing up.” 

Imports to U.S. ports are running 10% ahead of where they were last year, indicating that some cargo had been shipped in expectations of a strike, according to Ben Nolan, a transportation analyst at investment bank Stifel.

“Many retailers have already taken steps to mitigate the potential impact of a strike by bringing in products earlier or shifting products to the West Coast,” said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation. 

Still, given the complexity and interconnectedness of global supply chains, “Even a minor disruption would have a negative impact and cause delays at a critical time for both retailers and consumers,” he added.

The ILA on Wednesday said its members would continue to handle all military cargo in the event of a strike, and would also continue to work passenger cruise vessels so as not to inconvenience “the tens of thousands of Americans who have booked trips in advance.”

Could there be a political solution?

If a strike were deemed to threaten national health or safety, under the Taft-Hartley Act President Joe Biden could seek a court order for an 80-day cooling-off period. 

Although a Biden administration official tells CBS News that the U.S. Labor Department is monitoring the situation and has been in touch with the sides, there are currently no plans to get involved in the talks.

“We’ve never invoked Taft-Hartley to break a strike and are not considering doing so now,” the White House told Reuters earlier this month. 

By contrast, the Biden administration has recently intervened to resolve potentially disruptive labor disputes. 

In 2022, Mr. Biden and Congress stepped in to prevent a railroad strike, with the president signing legislation crafted by lawmakers to impose a tentative deal on dozens of unions representing 115,000 workers. And in 2023, Acting Labor Secretary Julie Su played a key role in brokering a deal to avert a strike and broker a new labor deal for West Coast dockworkers. 

The union’s leverage is also stronger ahead of the presidential election as candidates vie for the labor vote, and with visions of clogged ports and product shortages during the pandemic still in voters’ minds. 

“If ever there was a time that labor can get what they want,” Stifel’s Nolan said, “it’s right now.”

Some observers think that when push comes to shove, Mr. Biden would act to prevent the walkout. 

“The potential strike at East and Gulf Coast ports is unlikely to trigger any major economic disruption because we strongly suspect that, this close to the election and despite denials ahead of time, President Biden would have little choice but to step in and invoke back-to-work legislation,” wrote analysts at Capital Economics. 

contributed to this report.