The multibillion-dollar trade came to an abrupt halt at U.S. East Coast and Gulf Coast ports after members of the International Longshoremen’s Association (ILA) began walking off the job at 12:01 a.m. ET on October 1. The ILA is the largest union of longshoremen in North America. with about 50,000 of its 85,000 members making good on the threat of a strike at 14 major ports under a just-expired master contract with the United States Maritime Alliance (USMX), and picket workers beginning to show up at ports. The union and port owners group failed to agree on a new contract before midnight in a protracted battle over wage increases and the use of automation.

In a last-ditch effort Monday to avert a strike that will do significant damage to the U.S. economy if it lasts long — at least hundreds of millions of dollars a day at the largest ports like New York/New Jersey — the USMX offered a nearly 50% pay increase over six years, but that was rejected by the ILA, according to a source close to the negotiations. The port owners group said it hoped the offer would lead to a resumption of collective bargaining.

The 14 ports where preparations for the strike are underway are Boston, New York/New Jersey, Philadelphia, Wilmington, North Carolina, Baltimore, Norfolk, Charleston, Savannah, Jacksonville, Tampa, Miami, New Orleans, Mobile and Houston.

New York Governor Kathy Hochul said in a statement shortly after midnight that “the first large-scale strike by eastern dockworkers in 47 years began at ports from Maine to Texas, including at the Port Authorities of New York and New Jersey. To prepare for this Right now, New York has been working around the clock to ensure our grocery stores and medical facilities have the essential products they need. It is critical that USMX and the ILA quickly reach a fair agreement that respects employees and ensures the flow of commerce through our stores. In the meantime, we will continue our efforts to minimize disruption to New Yorkers.”

The rhetoric from the ILA leadership was aggressive in the weeks leading up to the strike, with ILA president Harold Daggett, who was a member of the union when the union last went on strike in 1977, telling rank-and-file members – who unanimously voted in favor voted to authorize a strike – in a recent video message: “We will crush them.”

In a video posted to an ILA Instagram account, Daggett addressed union workers at Maher Terminals in Elizabeth, New Jersey. “This will go down in history, what we’re doing here,” he said. “They can’t survive for too long,” he added.

For now, it’s the supply chain and the U.S. economy that will take the immediate hit.

Shana Wray, chief solutions architect for supply chain intelligence company FourKites, tells CNBC the strike comes at the worst possible time, impacting supply chain congestion that is exacerbating the devastation left in its wake by Hurricane Helene.

“Helene caused ports to delay openings at the ports of Charleston and Savannah, as well as power losses at intermodal facilities in Savannah, Charleston and Atlanta,” Wray said. “This caused ocean, freight and rail congestion at ports in the Southeast and the Gulf.”

Both economists and logistics managers say the strike’s impact will depend on how long the work stoppage lasts.

“A week or two of disruption will cause some delays, but the broader impact will be minimal outside a handful of highly port-dependent areas, including Savannah,” said Adam Kamins, an economist at Moody’s Analytics. “But anything longer will lead to shortages and upward price pressure,” he said.

The main problems would be related to the food and car industries, Kamins said, as they are particularly dependent on the ports that will be closed. While a rise in inflation is highly unlikely even with a longer strike, even a modest acceleration in inflation could create uncertainty and force the Federal Reserve to be more cautious in cutting rates, weighing on the overall outlook for job growth and investments.

A weeklong strike could cost the U.S. economy $3.78 billion and cause supply chain delays until mid-November, according to an analysis by The Conference Board. In total, the ports threatened with strikes handle $3 trillion in annual US international trade.

Many sectors are preparing for major consequences. Noushin Shamsili, CEO and president of Nuco Logistics, which specializes in the import and export of pharmaceutical products, said the strike comes at a crucial time for replenishing inventories in the pharmaceutical sector.

“Almost the entire industry is right on time,” says Shamsili. “Raw materials are supplied to complete the production of medicines. Medical supplies for clinics and hospitals are located on these ships. Importers haven’t brought in much cargo for a while as they’ve been flooded with supplies after Covid-19. Now they have started reordering medical devices, gloves, syringes and tubing.”

Shamsili also said that the ports on the east coast are a gateway for generic medicines made in India. About 48% of active pharmaceutical ingredients used in the US are imported from India. Without these APIs, medicines cannot be produced. APIs are also manufactured in Europe, which also uses its East Coast ports as an entry point into the US.

Steve Lamar, CEO of the American Apparel and Footwear Association, said these ports are critical to the retail industry. In 2023, East Coast and Gulf Coast ports accounted for 53% of all U.S. imports of apparel, footwear and accessories, worth more than $92 billion.

“The clock is ticking,” Lamar said. “Every day of strikes brings another five days of disruption as our consumer-driven economy hits the docks just as the busy holiday shopping season arrives. Both parties must come back to the table and the government must be ready to use all its tools to ensure that this happens. Reaching a fair, sustainable and long-term deal is task number 1 for all parties.”

Importers such as Walmart – the No. 1 importer in the affected ports – as well as other top importers including Home Depot,Ikea, Samsungand LG Electronics will find little to no options to shift trade to Canada or the West Coast as other unions close ranks in support of the ILA’s labor fight.

According to data from ImportGenius, these companies are among the largest importers in the fourteen major ports that would be affected by an ILA strike.

The last time the ILA went on strike in 1977, the ILWU union in West Coast ports supported it by allowing ILA members to go to the Port of Los Angeles to stop the unloading of diverted ships. ILA President Daggett, who was involved in these actions as a young union member, recently cited this historic example in communications with supporters.

The ILA has also made it clear that all its members, including those not covered by the expired contract, will close ranks. “You can be assured that the ILA’s 85,000 members will support their sisters and brothers,” James McNamara, spokesman for the ILU, recently told CNBC.

The Teamsters released a statement Monday evening from chairman Sean O’Brien saying it stood “100%” behind the ILA in the fight for a new contract and reminding members that Teamsters do not cross picket lines. “The ocean carriers are on strike against themselves after failing to negotiate a contract that recognizes the value of these workers,” O’Brien said, adding some harsh words about any attempt by the federal government to to get involved in the labor action.

The National Retail Federation has indicated that items on ships in transit will arrive before Oct. 1 and then restock items for the holidays, as well as just-in-time products such as auto parts and pharmaceuticals.

Between 43% and 49% of all U.S. imports and billions of dollars in monthly trade are now embroiled in the failed talks over a new union contract, which collapsed in June amid ILA allegations that ports were violating rules regarding use of automation.

The White House has engaged senior officials since late last week, including Transportation Secretary Pete Buttigieg, acting Labor Secretary Julie Su and National Economic Council Director Lael Brainard in an effort to bring the ILA and USMX back to the negotiating table to negotiate a deal quickly.

Late Monday, USMX released a statement saying it had made counter-offers with the union in the past 24 hours, including an offer to increase wages by nearly 50% over six years, reduce employer contributions to employee pension plans, tripling the healthcare options, and maintaining the current contract language around automation and semi-automation.

The union had already said in a statement at 11 a.m. ET on Monday that “the Ocean Carriers, represented by USMX, want to enjoy the rich billion-dollar profits they make in 2024 while offering ILA Longshore Workers an unacceptable wage package that we reject. .” The statement added that the union saw the USMX as “planning to instigate a strike at all ports from Maine to Texas in nearly 12 hours.”

The Biden administration is in a delicate political moment, with the presidential election just a month away and President Biden vowing not to use existing labor law to force union workers back to work, which is within his powers under the Taft-Hartley Act.

The Taft-Hartley Act, passed in 1947, was a revision of the United States Labor Relations and Trade Union Activities Act, which granted a United States president the power to suspend a strike for an 80-day “cooling off” period in cases where “the national health or security” are at risk.

The White House has reiterated its position several times in recent days: “We have never called on Taft-Hartley to break a strike and are not considering doing so now.”

Cruise operations and military operations in ports will continue.