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A potential port strike could cause problems for small businesses

Vaseline September 30, 2024

Time is running out to prevent a strike at ports from Maine to Texas that could cost the economy $5 billion a day and disrupt the holidays for millions of Americans.

As the clock strikes midnight, the labor contract between 45,000 union dockworkers and the United States Maritime Alliance (USMX) expires, and the workers have vowed to leave without a new deal. A strike at these 36 ports would be the first since 1977. According to the National Association of Manufacturers, more than 68% of container exports and more than 56% of container imports flow through ports on the East Coast and Gulf Coast.

Any strike lasting more than a few days is likely to trickle down to consumers, but small and medium businesses and exporters, especially farmers, could feel the pressure even sooner due to rising costs and product shortages, experts say. According to the Small Business Administration, small businesses are responsible for more than 40% of economic activity.

The “strike has serious consequences for the American economy, especially for small businesses,” said Javier Palomarez, president and CEO of the Hispanic Business Council of the United States. “If a solution is not found soon, small businesses will face one of the biggest supply chain disruptions since COVID-19, and many do not currently have the resources to do so.”

After two years of high inflation, small and medium-sized businesses are less able to cope with higher shipping costs and shortages this holiday season, experts say.

What is at stake for farmers and agricultural exporters?

According to the American Farm Bureau Federation (AFBF), about 14% of all U.S. waterborne agricultural exports would be affected by volume. It values these exports at approximately $318 million per week.

Products that would feel the biggest hit according to the AFBF include:

PoultryNearly 80% of waterborne poultry exports would be at risk, driving down prices for poultry producers as they lose vital market access, the report said. Nearly half of the East Coast’s containerized poultry exports pass through the Port of Savannah. The decline in poultry exports would trickle down to feed suppliers, especially those producing corn and soymeal, the report said.
Soybeans: “Cutting off this vital outlet for producers is especially painful when soybean producers are expected to harvest a bumper crop,” wrote AFBF economist Daniel Munch. “Soybean producers near Norfolk, Virginia – which handles more than 60% of the East Coast’s containerized soybean exports – could feel the greatest impact.”
Hay
Cotton
Red meat
Vegetables
Dairy products
Edible nuts

Excluding international markets like China, Vietnam and Indonesia, 3.2 million U.S. citizens in Puerto Rico could be affected by shortages and higher prices. More than 85% of the island’s food supply comes from the continental U.S., with 90% of those shipments passing through these ports, according to AFBF.

What is at stake for small and medium-sized businesses?

The strike could be a disaster for some small and medium-sized businesses, experts say.

While large companies like Walmart and Costco can afford to stockpile and stockpile early, or absorb the costs of diverting shipments to the West Coast, smaller companies typically cannot, they say.

As a result, “some businesses could miss out on essential holiday supplies completely,” said Ben Johnston, chief operating officer at small business capital provider Kapitus. “Given the low margins of most small manufacturers, retailers and wholesalers, a strike of this nature could be the difference between making a profit or suffering an annual loss.”

Key sectors such as retail, manufacturing, food and agriculture and pharmaceuticals will be hit hard by the resulting supply chain disruptions, Palomarez said.

What is at stake for consumers?

Consumers could eventually face higher prices and shortages again, some analysts said.

“Any strike that lasts longer than a week could cause shortages of goods for the holiday season,” said Eric Clark, portfolio manager at Accuvest Global Advisors. “We could get six months of inflation similar to or worse than peak inflation levels a year ago.”

In addition, Americans could face furloughs and job losses as the job market cools, some retail experts say. Companies, especially manufacturers, that rely on low inventories to keep costs down may experience parts shortages. If that happens, “the assembly lines could be shut down,” said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation.

Small businesses are struggling: Many small businesses are faltering as costs remain high while revenue declines

Companies that have made plans may have a better chance of weathering a prolonged strike, says Dave Charest, director of small business success at marketing firm Constant Contact.

“More than 40% of small businesses wait until October to start thinking about the holidays, but those who have already started reaching customers and ordering inventory are in a stronger position to succeed,” Charest said.

Still, small businesses remain concerned.

“The mood on Main Street already deteriorated in August,” Bill Dunkelberg, chief economist at the National Federation of Independent Businesses, said in a news release earlier this month. “Historically high inflation remains the biggest problem for owners as sales expectations plummet and cost pressures increase.”

Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news, every Monday through Friday mornings.