Buying Clothes in the US Is About to Get More Expensive

Delays of shipping caused by fighting in the Red Sea could lead to a rise in prices of goods—such as sneakers, apparel and consumer electronics—coming from Asia to the U.S., a supply chain expert told Newsweek.

In November, the Houthis, a Yemeni rebel group, instigated attacks on commercial ships passing through the Red Sea leading to what the United Nations has said is a severe disruption of international shipping. The attacks have sparked a military response from U.S. vessels in the area and the escalated fighting has forced commercial ships to reroute their journeys to a longer trip through Africa. The rebels have said they are engaged in the attacks in response to Israel's military campaign against Hamas in Gaza.

Vessels that carry goods to the U.S. also go through the Panama Canal, which has had its own challenges of not having enough water to allow for travel through the path.

"It's kind of like a one-two punch," Patrick Penfield, a professor of supply chain practice at Syracuse University, told Newsweek.

Penfield said 40 percent of shipments from Asia go to the U.S. through the Panama Canal, so with access to the Suez Canal also now limited, vessels carrying goods to the East Coast of America will now take longer to deliver their shipments.

"It's slowing everything down," Penfield said. "What that basically means is it's going to take 10 extra days to get there, another 3500 miles."

Companies that depend on inventory supplies from Asia will be impacted, Penfield added. These include things like sneakers, apparel and consumer electronics from countries such as China. Companies may be forced to pay more to get their inventory delivered, the costs of which could be passed on to consumers pushing up prices.

Companies are negotiating their shipping contracts right now and should the problems in the Red Sea continue, they could lead to prices jumping to between 3 to 5 percent, Penfield said.

He added that for the moment, the supply chain issues that have arisen as a result of the Houthi attacks have yet to reach the levels seen during COVID which helped to shoot up the price of goods to record levels.

"They won't be as bad as what we saw with COVID," Penfield told Newsweek. "That being said, you know, if the hostilities get worse and we see an actual war breakout, then all bets are off and that will cause issues with freight prices."

An escalation of conflict could also affect oil prices, which in turn may lead to a rise in gas prices. Penfield suggested that the low demand for gas has kept prices low. Both Brent crude and WTI crude oil prices are down, according to data from Bloomberg Energy.

"But again, if this is a prolonged type situation, absolutely oil and gas prices will go up," Penfield said.

The Suez Canal is crucial to the flow of goods from Asia to Europe and the U.S., with 12 percent of global trade passing through the pathway. The effect on consumers may not be felt immediately but come spring and the summer, they may start to notice the lack of availability of things.

"That's when you'll start to say, 'Oh, you know there's not that much availability of these sneakers or, you know, sporting apparel or anything, again, that comes from. Asia,'" Penfield said. "There'll be less."

Companies can fly stuff using air freight, but that will mean having to pay more for those services.

"It's just it's very costly," Penfield said. "So, that's the dilemma you have if you're a business is how much margin you [are] going to have impacted by this particular global shipping situation."