The domino effect of port closures on the west coast
Ports along the West Coast will be closed for four days over the Presidents Day weekend due to a labor standoff, and this will have a significant impact on business not only in the US but across the world. As the chaos theory goes, “When a butterfly flaps its wings in one part of the world, it can cause a hurricane in another part of the world.” This famous saying describes today’s complex networked economy where trading relationships are global and interlinked. If the West Coast Ports are closed:
- Retailors who rely on surviving on low inventories and imports from foreign manufactories could run out of inventory
- Manufacturers will not get raw materials from suppliers, components from their outsource manufacturers or be able to ship internationally
- Agricultural importers and exporters will have goods rotting on the docks
In a study conducted in 2014, the National Retail Federation and National Association of Manufacturers estimated that a shutdown of ports in cities like Los Angeles, San Francisco, Portland and Seattle could cost the U.S. economy almost $2 billion per day. It also estimated that a five-day stoppage would reduce GDP by $1.9 billion a day, and would increase exponentially with a 20-day stoppage resulting in a loss of $2.5 billion a day.
It will be interesting to watch the domino effect of the labor unions “flapping their wings” over the next week or 2.
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