Labour disputes stretching from North America to India are threatening a new wave of disruptions to US supply chains after rail workers in Canada stopped working on Thursday.
Freight groups are warning that the work stoppage at Canada’s two biggest railroad operators could be followed by a strike at ports on the US east coast in the coming weeks, leaving west coast ports overwhelmed in the lead-up to retailers’ peak Christmas season.
The unrest could worsen with promised industrial action at ports across India, at a time when shipping has already been disrupted for months by the Houthi militant group’s attacks on ships in the Red Sea, which have all but closed off a key passage for global trade.
Importers are facing “an earthquake in the US supply chain”, said Mia Ginter, head of North American ocean trade at freight transport group CH Robinson. If imports bound for Canadian and US east coast ports have to be rerouted, “there is no possibility [that west coast ports] can cope”.
She added: “I’ve been in this industry 40 years and I think this is the most significant convergence of potential disruption I’ve ever seen.”
Mads Raven, head of US air and sea logistics at freight forwarder DSV, which connects retailers and shipowners, said: “We’re seeing concerns from pretty much every major importer.”
US retailers ordered much of their Christmas stock early due to the Red Sea disruption. But if they are not already diverting undelivered stock to the west coast in preparation for the strikes, “you probably won’t see that stock in store by mid-November”, Raven said. “That’s the risk.”
The labour disputes could close off entry points for US imports as businesses rush to get goods into the country, not only for the holiday season but also in anticipation of increasing trade restrictions with China. Millions of dollars’ worth of goods enter the US daily through east coast harbours and on trains carrying products that enter North America at Canadian ports.
Since May, President Joe Biden has raised tariffs on Chinese goods including electric cars and steel, in a pre-election bid to protect US jobs and build support in former industrial heartlands. Donald Trump, the Republican presidential candidate, has threatened to impose a 10 per cent levy on all US imports if elected in November, as well as a 60 per cent tax on Chinese goods. The potential strikes could drive up the cost of imports further.
In preparation for the Canadian railway strikes, German shipowner Hapag-Lloyd this week announced a $400 fee for each US delivery diverted from a Canadian port to the US. On top of such surcharges, importers would also have to pay to transport goods across the country on trains or trucks to destinations such as New York.
“We’ve seen a massive push to import commodities that have been heavily hit by Biden’s tariffs”, as well as goods that Trump is expected to target if elected, said one freight forwarding executive.
US retailers “need [to reroute imports] right now [but] everybody is lingering around the decision because it’s going to cost,” he said, adding that diverting goods intended for east coast ports to the west coast could triple their shipping costs.
The number of container ships arriving at west coast Los Angeles and Long Beach ports rose by 7 per cent to 108 between the first 20 days of July and the same period in August, according to shipping consultancy MDST Transmodal. The number calling at New York and Savannah ports dropped 4 per cent to 205.
About 75 per cent of Canadian freight rail traffic had been halted by Thursday after the country’s two major carriers, Canadian National and Canadian Pacific Kansas City, locked out 9,300 workers. The railways failed to reach an agreement with the workers’ union, Teamsters Canada, on issues including work schedules and pay before the previous contract expired.
Moody’s estimated this week that the strike could cost the Canadian economy more than C$341mn (US$251mn) a day. Business groups warned of “devastating” consequences on both sides of the US-Canadian border, as industries including agriculture, construction, meat processing and car manufacturing rely on the railways to move freight through Canada and into the US and Mexico.
Shippers had already diverted some freight to US ports in preparation for a shutdown, said Jim Vena, chief executive of the US railroad Union Pacific. But that contingency has been complicated by the potential for industrial action in the US.
About 85,000 dockworkers at 36 US east and gulf coast ports represented by the International Longshoremen’s Association are threatening to strike in October after the expiry of their contract. The ILA said it planned to meet port operators to discuss wages next month.
Freight executives said upcoming strikes in India, the world’s 10th-largest exporter, were only deepening their concerns.
This month, a group of Indian port and dock worker unions announced an indefinite national strike to start on August 28.
Frustrated and dissatisfied with more than two years of negotiations over pay, allowances and pensions, the union coalition said discussions were in “deadlock”, calling industrial relations at the ports operated by India’s government “pathetic”, according to a letter seen by the Financial Times.
India’s shipping ministry did not respond to a request for comment.
A prolonged strike could further dent India’s export of goods, which fell 3 per cent in the last financial year to $437bn, just as it seeks to boost trade and capitalise on worsening US-China relations.
“India is a major trade partner for the US,” said Ginter at CH Robinson. “It’s been one of the beneficiaries of the move away from China. So a shutdown for any length of time would be very impactful.”
