As Canadian rails grind to a halt, so may several sectors of the US economy

At 12:01 a.m. Thursday, Canada's two biggest railroads locked out more than 9,000 workers, causing their rail networks to shut down for the first time ever and ushering in potentially "devastating" consequences for both the Canadian and American economies.

Canadian National Railway, Canadian Pacific Kansas City and the Teamsters Canada Rail Conference union — which represents more than 10,000 workers — failed to come to an agreement after months of labor talks.

The companies and union blamed each other for the stoppage.

Teamsters demanded better wages and benefits, as well as improved provisions for fatigue, rest and scheduling. CN said the union "did not respond" to their offers of better wages and fewer work days in a statement released shortly after the start of the lockout. CPKC said in its statement that it was "clear that a negotiated outcome with the TCRC is not within reach."

"CPKC is acting to protect Canada’s supply chains, and all stakeholders, from further uncertainty and the more widespread disruption that would be created should this dispute drag out further resulting in a potential work stoppage occurring during the fall peak shipping period," the statement said. "Delaying resolution to this labour dispute will only make things worse."

Teamsters president Paul Boucher said Thursday that the two companies "don't care about farmers, small businesses, supply chains, or their own employees. Their sole focus is boosting their bottom line, even if it means jeopardizing the entire economy."

Boucher added that talks are continuing.

The most recent railway stoppage was a 60-hour strike at Canadian Pacific in 2022. Three years prior, Canadian National had a nine-day strike. However, the current situation is a lockout, not a strike.

The U.S. Chamber of Commerce and Canadian Chamber of Commerce released a joint statement calling on government intervention, saying that the stoppage would be "devastating to Canadian businesses and families and impose significant impacts on the U.S. economy."

Supply chains between Canada and the U.S. are deeply integrated and reaches into multiple industries. CN and CPKC, in particular, help to move billions of dollars' worth of goods across the continent, according to Reuters.

Rail transport accounted for about 14% of total bilateral trade of $382.4 billion between the two countries in the first half of the year, according to the U.S. Department of Transportation. About a third of the traffic moved by CN and CPKC crosses the border with the United States.

A three-day freeze could create $300 million in losses for employees and businesses, according to estimates by Michigan firm Anderson Economic Group. A seven-day freeze would increase that number to $1 billion.

The stoppage is set to cripple grain, potash and coal shipments while slowing the transport of petroleum products, chemicals and autos. Three U.S. industries may be particularly impacted in the coming days:

Agriculture

Shipments of U.S. spring wheat from Minnesota, North Dakota and South Dakota to the Pacific Northwest for export will be hard-hit, according to Reuters.

Canada is the third-largest export destination for American agricultural products, totaling at $28.3 billion in value in 2023, while Canada is the second-largest source of U.S. agricultural imports — $40.1 billion worth of products were imported last year. Traded products include corn, cereals, food grains, cooking oils and meats.

In a joint letter to Prime Minister Justin Trudeau, nearly 40 North American agriculture groups warned of the "particularly severe" impact the shutdown will have on bulk commodity exporters in the U.S. and Canada.

Farmers may be affected by a shortage of fertilizer, which is the third-highest commodity shipped by Canadian railways in terms of volume.

Autos

In 2023, the U.S. imported and exported $73 billion worth of transportation equipment from Canada, according to Reuters, who cited the International Trade Administration.

CPKC offers routes between assembly plants and markets like Chicago, Houston, the Twin Cities and Kansas City, according to its website. The company also serves approximately 90% of automotive assembly plants in Mexico. These services are now curbed.

Trucking

U.S. freight forwarder C.H. Robinson said about 85% of all U.S.-Canada cross-border freight is primarily handled by Canadian trucking carriers. While truckers can help carry part of the displaced load, they are not a perfect substitute for rail distribution. The trucking industry lacks the equipment and capacity to handle bulk commodities.

With chemicals, for example, it would take at least three trucks to transport the same amount that one rail tank car can carry. The shortage may mean insufficient chlorine, which water treatment plants use to purify water.

Aside from industries, commuters will also be impacted. More than 32,000 people in Toronto, Montreal and Vancouver will have to find a new way to get to work, according to the Associated Press, as all train movement on CPKC lines has been halted.

Dr. Patti Jordan, a Texas Christian University professor in the Supply Chain Management Department, predicted that the lockout could last up to two weeks, she told NBC DFW. Anything beyond that could push the Canadian economy to the brink.