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A possible port strike could be a game-changer for small businesses

Posted on by Vanessa
A possible port strike could be a game-changer for small businesses

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

When the clock strikes midnight, the labor contract between 45,000 union longshoremen and the United States Maritime Alliance (USMX) will expire, and workers have vowed to go without a new contract. A strike at those 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 and Gulf Coasts.

Any strike that lasts longer than a few days is likely to spill over into consumers, but small and medium-sized businesses and exporters, especially farmers, could feel the pressure even sooner amid rising costs and product shortages, experts say. According to the Small Business Administration, small businesses account for more than 40% of economic activity.

The “strike has serious consequences for the U.S. economy, particularly for small businesses,” said Javier Palomarez, president and chief executive of the United States Hispanic Business Council. “If a solution is not found soon, small businesses will face one of the largest supply chain disruptions since COVID-19, and many do not have the resources to do so at this time.”

After two years of elevated inflation, small and medium-sized businesses will be less able to cope with higher shipping costs and shortages this holiday season, experts said.

What is at stake for farmers and agricultural exporters?

According to the American Farm Bureau Federation (AFBF), approximately 14 percent by volume of all U.S. agricultural exports by water would be affected. The value of these exports is around $318 million per week.

The products that would see the most success according to AFBF include:

  • poultry: Nearly 80% of aquatic poultry exports would be at risk, driving down prices for poultry producers as they lose key market access, it said. Nearly half of the East Coast's containerized poultry exports pass through the Port of Savannah. The decline in poultry exports would impact feed suppliers, particularly those producing corn and soybean meal, it said.
  • Soybeans: “The foreclosure of this vital outlet for producers is particularly painful when soybean producers are expected to produce a bumper crop,” wrote AFBF economist Daniel Munch. “Soybean producers near Norfolk, Virginia – where over 60% of soybeans exported are containerized on the East Coast – could feel the greatest impact.”
  • hay
  • Cotton
  • Red meat
  • Vegetables
  • dairy products
  • Edible nuts

Aside from international markets such as China, Vietnam and Indonesia, 3.2 million American citizens in Puerto Rico could be affected by shortages and higher prices. According to AFBF, more than 85% of the island's food supply comes from the mainland U.S., with 90% of those shipments passing through these ports.

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

The strike could be life-threatening for some small and medium-sized businesses, experts said.

While large companies like Walmart and Costco can afford to capture and store inventory early or incur the costs of redirecting shipments to the West Coast, this is typically not possible for smaller companies, they said.

As a result, “some businesses could miss out on essential holiday supplies entirely,” said Ben Johnston, chief operating officer at small business lender Kapitus. “Given the low margins of most small manufacturers, retailers and wholesalers, a strike of this nature could mean the difference between a profit or 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 end up facing higher prices and shortages again, according to some analysts.

“Any strike that lasts longer than a week could lead to inventory shortages for the holidays,” said Eric Clark, portfolio manager at Accuvest Global Advisors. “We could have six months of inflation that is similar to or even worse than peak inflation a year ago.”

Additionally, Americans could face furloughs and job losses as the labor market slows, some retail experts said. Companies, particularly manufacturers, that rely on low inventory levels to keep costs down could face parts shortages. If that happens, “assembly lines could be shut down,” said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation.

Small businesses struggle: Many small businesses are struggling as costs remain high while sales decline

Businesses that have planned may have a better chance of surviving a lengthy strike, said Dave Charest, director of small business success at marketing firm Constant Contact.

“Over 40% of small businesses are waiting until October to think about the holidays, but those that have already started reaching out to customers and ordering inventory are in a better position to succeed,” Charest said.

Still, small businesses remain concerned.

“Sentiment on Main Street was already worsening in August,” Bill Dunkelberg, chief economist for the National Federation of Independent Businesses, said in a news release earlier this month. “Historically high inflation remains the biggest concern for owners as revenue expectations fall and cost pressures increase.”

Medora Lee is a money, markets and personal finance reporter for USA TODAY. Reach her at [email protected] and sign up for our free Daily Money newsletter every Monday through Friday morning for personal finance tips and business news.

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