The Ports Strike Back

What’s Happening: An East and Gulf Coast port strike began early October 1 after contract negotiations failed between the International Longshoremen’s Association (ILA) and U.S. Maritime Alliance (USMX), an association that represents employers of both coasts’ longshore industry. The ILA’s demands for a new six-year contract included a 77-percent wage increase along with limitations on port automation to ease job-loss concerns. Prior to the strike, USMX made a counteroffer to increase wages by 50 percent, triple retirement plan contributions, limit automation, and provide more health care options. More precise details on the back and forth between the ILA and USMX are limited, but the negotiation ultimately resulted in the ILA rejecting the offer. Now more than 45,000 dockworkers are on strike.

Why It Matters: The port strikes will have a sweeping impact on the U.S. economy, with cost estimates ranging from $540 million to $5 billion for each day of the strike. A one-day strike is estimated to cause between a four-to-six-day shipping backlog, while Danish shipping company Maersk warns that a week-long strike could produce up to six weeks of delays. Some retailers such as Costco prepared for the strike by stockpiling certain goods ahead of time, but perishable goods, especially fruits, may be in short supply depending on how long it takes for the ILA and USMX to reach a deal.

Looking Ahead: On Tuesday, the president of the ILA stated that the union would seek a 61.5-percent wage increase rather than the initial 77 percent but later in the day reverted to the larger demand, along with a new stipulation for 100 percent of container royalties. If the USMX agrees to these terms, the deal would likely result in over $500 million a year in additional labor costs by 2030 – and these added costs could then result in additional port fees or surcharges that raise the cost of importing and exporting at U.S. ports. President Biden stated Tuesday on X that foreign ocean carriers must offer “a strong and fair contract” to the ILA due to their record profits and has directed his administration to monitor for price gouging – although any increase in prices is likely to result from the strike’s constraint on the supply of goods.

Crackdown on Chinese EVs

What’s Happening: Trade tensions between China and the European Union (EU) are in the spotlight as the EU votes Friday on whether to impose tariffs of up to 35 percent on Chinese electric vehicles (EVs). The back and forth between the two parties since June has done little to address the EU’s complaints that China is unfairly subsidizing its EV manufacturers. While talks are still underway, the vote is likely to introduce tariff protections, and even if negotiations prevail, the EU will still market restrictions in the form of quotas or minimum EV prices.

Why It Matters: The United States is undertaking a similar crackdown as the Biden Administration hiked tariffs on Chinese EVs from 25 percent to 100 percent on September 27. The move signaled the strength of the protectionist consensus between the United States and EU and is likely to be a major blow to Chinese manufacturers who depend on access to Western markets and seek to capitalize on a global green energy transition. EU tariffs will also impact U.S. companies such as Tesla, which will face a 7.8-percent tariff rather than the topline 35-percent barrier on cars made in China.

Looking Ahead: The U.S. decision to hike tariffs on Chinese EVs – and the EU’s likely forthcoming decision to follow suit – are large data points in the Western trend of putting up trade barriers against China’s heavily subsidized or strategically important industries. Higher EU trade barriers would have severe consequences for China, as well: Europe represents roughly 20 percent of the global EV market. But if Europe decides to erect higher trade barriers, China will likely respond with retaliatory tariffs on EU goods, primarily those in the agricultural sector. In fact, China may instead opt to purchase agricultural goods from the United States – if, that is, China forgoes retaliation against recent U.S. tariffs.

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