• Approximately 50,000 ILA union longshoremen were walking off the job at East Coast and Gulf Coast ports from New England to Texas starting at 12:01 a.m. ET on Tuesday after failing to reach an agreement with ports ownership on a new contract, the union's first strike since 1977.
• Between 43%-49% of all U.S. imports and billions of dollars in trade monthly move through the U.S. East Coast and Gulf ports.
• The International Longshoremen's Association, the largest maritime union in North America, said in a Tuesday statement from ILA president Harold Daggett that it wants a $5 an hour per year increase over six years, all royalties for containers handled, and strict language against automation.
• USMX countered that its last offer, made on Monday, that included a wage hike over six years near 50%, "exceeds every other recent union settlement, while addressing inflation, and recognizing the ILA’s hard work to keep the global economy running."

Billions in trade came to a screeching halt at U.S. East Coast and Gulf Coast ports after members of the International Longshoremen's Association, or ILA, began walking off the job after 12:01 a.m. ET on Tuesday.

The ILA is North America's largest longshoremen's union, with roughly 50,000 of its 85,000 members making good on the threat to strike at 14 major ports subject to a just-expired master contract with the United States Maritime Alliance, or USMX, and picketing workers beginning to appear at ports. The union and port ownership group failed to reach agreement by midnight on a new contract in a protracted battle over wage increases and use of automation.

In a last-ditch effort on Monday to avert a strike that will cause significant harm to the U.S. economy if it is lengthy — at least hundreds of millions of dollars a day at the largest ports like New York/New Jersey — the USMX offered a nearly 50% wage hike over six years, but that was rejected by the ILA, according to a source close to the negotiations, who was granted anonymity to speak about the private negotiations. The port ownership group said it hoped the offer would lead to a resumption of collective bargaining.

In a statement on Tuesday, ILA President Harold Daggett said the union is "now demanding $5 an hour increase in wages for each of the six years of a new ILA-USMX Master Contract. Plus, we want absolute airtight language that there will be no automation or semi-automation, and we are demanding all Container Royalty monies go to the ILA."

ILA longshoremen currently receive royalties based on how much tonnage they process in a year (which can be anywhere between $15,000-$20,000 a year) at their port.

The USMX countered in its own statement on Tuesday afternoon that its last offer, made on Monday, that included a wage hike over six years near 50%, "exceeds every other recent union settlement, while addressing inflation, and recognizing the ILA’s hard work to keep the global economy running."

The 14 ports where preparations for a strike have been underway for days if not at least a week or longer are Boston; New York/New Jersey; Philadelphia; Wilmington, North Carolina; Baltimore; Norfolk, Virginia; Charleston, South Carolina; Savannah, Georgia; Jacksonville, Florida; Tampa, Florida; Miami; New Orleans; Mobile, Alabama; and Houston.

At New York/New Jersey terminals, it is estimated that 100,000 shipping containers "are literally in limbo in the port," said New York Gov. Kathy Hochul in remarks made on Tuesday. Shortly after midnight, the governor had said that in preparation for the first large-scale eastern dockworker strike in 47 years, "New York has been working around the clock to ensure that our grocery stores and medical facilities have the essential products they need."

Rhetoric from ILA leadership had been aggressive in the weeks leading up to the strike, with ILA President Harold Daggett, who was a union member the last time it went out on strike in 1977, telling rank-and-file members — who unanimously voted to authorize a strike — in a recent video message, "We'll crush them." 

In a video posted to an ILA Instagram account, Daggett addressed union workers at Maher Terminals in Elizabeth, New Jersey. "This is going down in history, what we're doing here," he said. "They can't survive too long," he added.

For now, it is the supply chain and U.S. economy which will take the immediate hit.

Shana Wray, principal solutions architect for supply chain intelligence firm FourKites, tells CNBC the strike comes at the worst possible time, with its impact on supply chain congestion to exacerbate the devastation left behind from 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," said Wray. "This created ocean, trucking, and rail carriers congestion across Southeast and Gulf ports."

Logistics experts have told CNBC in recent months there has been an exodus of cargo from the East to West Coast, and companies moved up orders for peak shipping season due to the strike risk. Both economists and logistics executives say the impact of the strike depends on how long the work stoppage lasts.

"A disruption of a week or two will create some backlogs but the broader consequences will be minimal outside of a handful of very port-reliant areas, including Savannah," said Adam Kamins, economist at Moody's Analytics. "But anything longer will lead to shortages and upward price pressures," he said.

The most significant issues would be faced by the food and automobile industries, Kamins said, as they rely especially heavily on the ports that will be shut down. While a surge in inflation is highly unlikely even with a longer strike, even a modest reacceleration could create uncertainty and force the Federal Reserve to be more cautious about lowering interest rates, which would weigh on the overall outlook for job growth and investment.

A one-week strike could cost the U.S. economy $3.78 billion, according to an analysis by The Conference Board, and cause supply chain slowdowns through mid-November. In all, the ports threatened with strikes handle $3 trillion annually in U.S. annual international trade.

Ultimately, global supply chains — already weighed down by various crises, from the Red Sea attacks rerouting shipping on longer transits around Africa to a prolonged drought at the Panama Canal — would suffer as freight congestion builds and container supply and demand is throw out of balance and capacity cannot get to international ports where it is needed.

Many industries are preparing for major repercussions. Noushin Shamsili, president and CEO of Nuco Logistics, which specializes in pharmaceutical imports and exports, said the strike comes at a critical time for inventory replenishment for the pharma sector.

"Almost all of this industry is just on time," said Shamsili. "Raw materials are being brought in to complete drug manufacturing. Medical supplies for clinics and hospitals are on these vessels. For a while importers did not bring in a lot of cargo because they were overflowing with supplies post-Covid. Now they have started reordering medical devices, gloves, syringes, and tubing."

Shamsili also said the East Coast ports are a gateway for generic medicine made in India. Approximately 48% of the active pharmaceutical ingredients used in the U.S. are being imported from India. Without these APIs, medications cannot be produced. APIs are also manufactured in Europe, which also use the East Coast ports as U.S. points of entry.

Steve Lamar, CEO of the American Apparel & Footwear Association, said these ports are critical for the retailing industry. In 2023, the East and Gulf coast ports accounted for 53% of all U.S. apparel, footwear and accessories imports, he said, amounting to more than $92 billion in value.

"The clock is ticking away," said Lamar. "Each strike day yields five more days of disruption as our consumer-driven economy gets snarled in port backlogs right as we hit the heavy holiday shopping season. Both sides need to get back to the table and the administration must be ready to use all of its tools to make sure this happens. Reaching a fair, long-term, and sustainable deal is job No. 1 for all parties."

Importers such as Walmart — the No. 1 importer across the affected ports — as well as other top importers including Home Depot, Ikea, Samsung, and LG Electronics will find few to no options to divert trade to Canada or the West Coast as other unions close ranks in support of the ILA's labor battle.

These companies are among the leading importers at the 14 major ports that an ILA strike would impact, according to ImportGenius data.

The last time the ILA went on strike in 1977 the International Longshore and Warehouse Union (ILWU) union at West Coast ports supported it by allowing ILA members to go to the Port of Los Angeles to stop the unloading of diverted vessels. ILA President Daggett, who was involved in those actions as a young union member, recently cited this historical example in communications with the rank and file.

The ILA has also made clear that all of its members, including those not subject to the expired contract, will be closing ranks. "You can be sure the ILA's 85,000 members will be supporting their Sisters and Brothers," James McNamara, spokesman for the ILA, recently told CNBC.

The Teamsters issued a statement on Monday night from its president, Sean O'Brien, saying it stood "100%" with the ILA in the fight for a new contract and reminding its 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, and he added some harsh words about any effort by the federal government to interfere in the labor action.

The UAW also voiced its support, while representatives from the ILWU joined Daggett and ILA members on the picket lines.

The National Retail Federation has said items on the vessels en route for Oct. 1 arrival and after are restocking items for the holidays as well as just-in-time products like auto parts and pharmaceuticals.

Between 43%-49% of all U.S. imports and billions of dollars in trade monthly are now caught up in the failed talks over a new union contract, which broke down in June amid allegations from the ILA that ports were violating rules related to the use of automation.

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

Late in the day on Monday, the USMX put out a statement saying within the past 24 hours it had traded counteroffers with the union, including an offer to increase wages by nearly 50% over six years, triple employer contributions to employee retirement plans, strengthen health care options, and retain the current contract language around automation and semi-automation.

The union had already said in statement issued at 11 a.m. ET on Monday that "the Ocean Carriers represented by USMX want to enjoy rich billion-dollar profits that they are making in 2024, while they offer ILA Longshore Workers an unacceptable wage package that we reject." The statement added that the union saw the USMX as "intent on causing a strike at all ports from Maine to Texas beginning in almost 12 hours."

The Biden administration finds itself in a delicate political moment, with the presidential election one month away and President Joe Biden vowing he will not use existing labor law to force union workers back on the job, which is within his powers under the Taft-Hartley Act.

The Taft-Hartley Act, passed in 1947, was a revision of U.S. law governing labor relations and union activity that granted a U.S. president the power to suspend a strike for an 80-day "cooling off period" in cases where "national health or safety" are at risk. 

The White House has reiterated its position several times in recent days that "We've never invoked Taft-Hartley to break a strike and are not considering doing so now."

The White House said in a statement Tuesday that impacts on consumers are expected to be limited at this time, including in critical areas of fuel, food and medicine, and added that it does not expect fuel or food prices to rise immediately or in the near term as a result of the labor action. "Senior White House and Administration officials continue to work around the clock to get both sides to continue negotiating towards a resolution," the White House said, again stressing that collective bargaining is the best way for workers and employers to reach an agreement.

Cruise operations and military operations at ports will continue.