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Railroad strike: Workers ‘need to be a part of that conversation,’ NRF VP explains

National Retail Federation Vice President for Supply Chain & Customs Policy Jonathan Gold speaks with Yahoo Finance about how supply chain slowdowns and a potential train strike are impacting major retailers ahead of the holiday season.

Video Transcript

BRIAN SOZZI: Let's stay on all things supply chain here. Let's bring in Jon Gold, the National Retail Federation's Vice President for Supply Chains and Customs. And Jon, you just heard Dani mention the potential railroad strike. How debilitating would this be for the retail shopping season, but look, even the economy, more broadly?

JONATHAN GOLD: Look, I think a rail strike would cause $2 billion in damage a day for the US economy. That's what the American Association of Railroads has projected. It's significant. I mean, everybody relies on the rails to get their goods to market-- imports, exports, agriculture manufacturers waiting on inputs to production, also sensitive materials, things like chlorine, which need to get into healthy drinking water. So this is significant if a rail strike were to occur on December 9.

DANI ROMERO: Yeah, and speaking on labor, automation has been tossed around a lot in the conversation. Is that the future of supply chain, seeing on the port side, also the-- anything revolving around supply chain?

JONATHAN GOLD: I think technology and automation certainly are critical to the future of the supply chain. If we truly want to have a 21st century global supply chain, we've got to bring technology and automation into it. We've got to bring the workers into it as well. They've got to be part of the discussion, as we're talking about the future in technology and automation. They've got to be part of that conversation. But it is going to be significant. And we've got to move forwards on getting that as a part of the supply chain. We've got to have better visibility and better connectivity for all the partners to understand what's happening at any stage in the supply chain.

BRIAN SOZZI: For those that don't have your expertise, Jon, would a railroad strike-- does that mean the truckers, logistics companies-- how can they pick up the slack? Is it-- would they just be overrun with demand and orders?

JONATHAN GOLD: So if a rail strike were to happen, that means the entire freight rail system would shut down. That means products moving from the ports, moving in the country, exports moving out, there is some capacity to pick up in truck, but you're not gonna be able to pick up all the cargo that moves on truck-- on rail that goes onto trucks. So we're going to have capacity issues.

BRIAN SOZZI: Well, it sounds like major delays of products.

JONATHAN GOLD: Definitely major delays if it were to happen. Obviously, a short-term would be better, but we hope there's no disruption whatsoever.

DANI ROMERO: Yeah, and speaking of trucking, California has this ambitious plan to make their trucking fleets change from diesel to electric. How feasible is that, really, for our current environment, our supply chain?

JONATHAN GOLD: I think as the truckers have said in California, it's a challenge. You don't have the infrastructure in place to be able to do the charging for the trucks that are needed, especially at our ports. We've got clean truck programs that are going to effect at the ports of [INAUDIBLE] Long Beach, but we don't have the number of trucks we need. We don't have the infrastructure. So I think many shippers want to work with California legislature, and let's get to a greener economy. Let's do it in a right way where we don't force people out of business to make it happen.

BRIAN SOZZI: Inflation and the supply chain, based on what you're seeing and based on what you're hearing from your contacts, what does the inflationary outlook look like over the next six months?

JONATHAN GOLD: I think inflation continues to be a concern. I would say consumers continue to be concerned about that. But look, we're going to have a positive holiday season. From what we've seen thus far, the research we've done, we're looking at 6% to 8% growth in the holiday season this year.

So looking at $942 to $960 billion in spending by consumers. So I think there's a lot of unknowns to what happens, going into next year. But I think retailers are trying to plan their best to be ready for that continuing consumer demand that we've seen for the past 30 months.

DANI ROMERO: And speaking of that, things have really shifted on the West Coast. They've gone from choke to fluid now, but there's also a dilemma, and that is on the warehousing capacity. What is the solution there? I mean, I've heard that warehouses are now expanding their outdoor space, but how much of that is really a temporary solution?

JONATHAN GOLD: Yeah, I think a lot of the challenges we face on the West Coast was everybody bringing product in earlier in the season, but also we've got the ongoing labor negotiations in the West Coast. That's why you saw such a shift this summer to the East Coast. And we've got East Coast and Gulf Coast ports are full. I think warehousing certainly is a challenge, as you've had full warehouses. But I think as retailers rightsize their inventory, they're going to be better able to process that inventory moving forward.

But making sure we're able to open up new warehouses, have better fulfillment centers that are in place, have regulations that help incentivize opening warehouses, move warehouses to other locations, have inland locations where you can then shift cargo to there. So I think there are some options there, but we've all got to work together to make it happen.

BRIAN SOZZI: Is the labor shortage in the trucking industry still as severe as it was a year ago?

JONATHAN GOLD: From what we hear, there still is a significant driver shortage that we continue to face, both on the [INAUDIBLE] side, as well as the long haul side. So I think labor throughout the supply chain continues to be a challenge.

DANI ROMERO: Yeah, and I wanted to shift gears a little bit on the US-China trade dispute saga. Do you believe that tariffs are inflationary? And is it really worth it, given our inflationary environment right now?

JONATHAN GOLD: We've said from the outset that tariffs were not the right strategy to deal with the China trade issues we've been dealing with. Putting tariffs on products for everyday consumers doesn't make sense and has not worked. We haven't seen China make the changes they were supposed to because of the tariffs. So we think there's a better-- there are better opportunities to engage China on some of these trade practices that not only impact the US, but impact our trading partners as well.

BRIAN SOZZI: How do you engage them?

JONATHAN GOLD: I think through ongoing dialogue. I think, look, having President Biden and President Xi actually have a conversation, once again, get that dialogue going, but then let's figure out a better path forward because the tariffs that have been applied on the China imports impact US consumers, impact US manufacturers. It only raises the cost of these goods for the ultimate consumer.

DANI ROMERO: Do you see any change happening, though?

JONATHAN GOLD: Not right now, but we want to continue to see change-- now, with USTR having their four-year review of the tariffs, hopefully now already having an opportunity to talk about the negative impact the terrorists have had over the past four plus years, and then, again, opening the door to have those conversations with the Chinese, which we haven't had in almost two years.

BRIAN SOZZI: I'm asking every guest that we have on here their big prediction for this holiday season. Are empty shelves over? What is your big prediction?

JONATHAN GOLD: I think, look, our big prediction, we put our forecasts out a couple of weeks ago. We're looking at 6% to 8% growth over last year's holiday sales, roughly $942 to $960 billion in consumer spending this year--

BRIAN SOZZI: That's not recessionary.

JONATHAN GOLD: That's not recessionary. And I think look, consumers have continued to spend throughout the pandemic and then some. We've seen 30+ months of month on month growth in the retail sector. Consumers want to go out and continue to spend and celebrate the holidays, where they haven't been able to do in the past. So, again, we're looking for another positive holiday season. We're looking at 166 million consumers ready to engage in this five-day holiday weekend we're going to have coming up either in-store or online. So consumers are ready to get out there and shop--

BRIAN SOZZI: I'm ready to engage, my man. I'm going to go out there and buy myself something. I don't know what it is. But you know what? I'm going to find it. Jon Gold, National Retail Federation's Vice President for Supply Chain and Customs, good to see you. And Dani Romero--

JONATHAN GOLD: Thank you very much.


BRIAN SOZZI: --good to see you. Appreciate it.