The International Longshoremen's Union, which represents around 45,000 port workers across the East and Gulf coasts, is set to strike next week if a deal is not reached by September 30. Flexport founder and CEO Ryan Petersen joins Josh Lipton and Julie Hyman on Market Domination to take a closer look at what a prolonged strike would mean for US supply chains and the economy.

Petersen says the impact of the strike depends on how long it lasts. “It really just depends on how long it lasts. If it just lasts for a day or two, it’s probably not a huge deal. It also happens to be that next week when this would kick in, if it does go down, is what's called the Golden Week holiday. When all of China's factories are shut down, and that's probably a happy coincidence that there's not a lot of activity anyways at the origin side of things of cargo moving out.”

“If it lasts for more than a few days or more than a week, you're going to get massive cascading effects of backlog building up of cargo that needs to get moved and can't. And you're talking about 15% of the world's container ships being taken offline. That's the percent that call at these ports every year. That's a huge reduction in capacity.”

He says, “The longer [a strike] lasts, the more that cargo build-up that backlog will build up, and the prices will go crazy sky high. You'll see supply chain disruptions of the type that we saw during Covid, but actually probably much worse. In the Covid instance, those were caused by a huge increase in demand for goods. This is really different. This is a decrease in supply, much worse from an economic impact standpoint.”

“The union is a very powerful force. They do a lot of great work. They work really hard. They deserve to get paid. But it's a fundamental dichotomy here between the employers and, in many cases, the brands, the companies that rely on these ports, and the union,” Petersen tells Yahoo Finance.

“The employers want automation; they want to lower cost. They want to reduce the number of workers for obviously obvious reasons. That's not what the union wants. And so you're at a bit of a standstill. There's the main issues here is how much are they going to get paid. That's always the negotiation, always a challenge. But the automation one is the really sticky one. These ports in many other countries are fully automated. They don't need the workers. And the union sees that. They know it. They know the writing's on the wall. They got to they got to stand up for their jobs.”

The CEO explains that rerouting shipments meant for the ports affected by a strike to the West Coast is not a viable option. “You saw in those statistics that 56% of the containers come into the East Coast. Well, the West Coast can't handle that much more volume. The ports would just not be able to handle it. There aren't enough ships calling it the West Coast in the first place.”

He notes, “The longer it lasts, the more you see that backlog building up at origins around the world, and then where it really gets bad is when these ships that are supposed to call in the East Coast, you know, after they unload their cargo, they're supposed to continue on on their journey back to Asia or back to Europe or wherever they may be going, and pick up more cargo. Well, if they're sitting there waiting in the East Coast, they're not continuing that journey. So you wait another month and they're not where they're supposed to be, and cargo is going to start building up in all these other parts of the world. And that's why you'll see this cascading effect as the bottleneck that's caused by this just ripples through the world's supply chain and causes very unpredictable outcomes.”

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This post was written by Naomi Buchanan.