The Biden administration has had a successful year in terms of economic growth and job creation. The December jobs report released by the Labor Department showed that employers added 216,000 jobs, surpassing economists’ expectations by over 40,000 jobs. Moreover, the unemployment rate remained steady at 3.7%. These positive figures indicated a growing momentum in the economy under the new administration.
Despite the positive economic indicators, the Biden administration now faces a new challenge in the form of global shipping delays caused by attacks on cargo vessels in the Red Sea. Danish shipping company Maersk, along with other major shipping companies, has decided to divert its fleet away from the Red Sea indefinitely due to ongoing attacks from Houthi rebels in the region. This diversion has already resulted in the rerouting of more than $200 billion in trade away from the Suez Canal since December.
The diversion of shipping routes away from the Red Sea poses a significant risk to the U.S. supply chain. White House officials are well aware of the potential domino effect these shipping holdups could have on the economy. After the challenges faced during the COVID-19 pandemic, which disrupted global supply chains and logistics, the administration understands the importance of ensuring smooth trade flows.
Jared Bernstein, Chair of the White House Council of Economic Advisers, emphasized the sensitivity towards supply chain disruptions and logistical logjams. He acknowledged the impact that such disruptions could have on the economy, stating, “Given what occurred during the pandemic, we’re very sensitive to the impact of supply chains and logistical logjams on the economy.”
The pandemic has already demonstrated the negative repercussions of shipping delays on the U.S. market. During the initial years of the pandemic, shipping ports experienced lengthy backups, preventing an estimated $24 billion worth of goods from reaching the U.S. market. If similar disruptions occur now due to the Red Sea shipping delays, the U.S. supply chain and economy could suffer once again.
Lael Brainard, Director of the National Economic Council, stated that the current delays have had a minimal impact on energy costs. Prices at the pump have not seen significant increases. However, Brainard deemed Maersk’s actions as “unacceptable.” It is important to note that she did not address the potential consequences for global manufacturing and consumer goods if the Red Sea remains too dangerous for major shipping lines to enter.
Already, several companies, including Ikea and Electrolux, have experienced adverse effects from the shipping delays, directly impacting their ability to sell products in the U.S. market. Without prompt resolution, these delays could have a significant impact on various sectors, affecting both businesses and consumers.
The Biden administration’s national security team is actively engaged in addressing this issue. They are working with a broad coalition of partners and maintaining close contact with shippers to find solutions to the shipping delays in the Red Sea. It is crucial for the administration to navigate this challenge effectively to prevent any further disruptions to the U.S. economy and supply chain.
While the Biden administration has achieved positive economic outcomes, global shipping delays threaten to hinder further progress. The redirection of trade routes away from the Red Sea due to attacks on cargo vessels could have far-reaching consequences for the U.S. supply chain, global manufacturing, and consumer goods. Prompt action and strategic coordination with international partners will be essential to ensuring the uninterrupted flow of trade and maintaining economic growth.