Canada’s two largest railroads, Canadian Pacific Kansas City (CPKC) and Canadian National (CN), are on the brink of shutting down operations due to a labor dispute with the Teamsters union.
The conflict threatens to disrupt cross-border trade with the U.S., potentially leading to lockouts or strikes. Both railroads have already stopped accepting shipments of hazardous materials and refrigerated goods in preparation for potential service interruptions.
CPKC announced that starting Tuesday, it will halt all shipments originating in Canada and any U.S.-based shipments headed for Canada. CN took similar steps by barring container imports from U.S. partner railroads on Friday.
These moves are part of a broader strategy to safeguard their networks from potential work stoppages. Both railroads have warned they will lock out workers if a deal isn’t reached with the union by Thursday.
The labor dispute is causing widespread concern about potential supply chain disruptions. Analyst Jeff Windau of Edward Jones & Co. suggested that if the work stoppages last longer than a few days, the economic impact could be severe.
Railroads are a critical component of the supply chain, handling approximately 40,000 carloads of freight daily, worth about $1 billion. The most affected sectors would likely be automotive, chemicals, forestry, and agriculture, especially with the harvest season approaching.
Despite the escalating tensions, CPKC and CN are still engaged in negotiations with the union. CPKC emphasized its commitment to avoiding a work stoppage but stated it had to take precautionary steps to manage the potential disruption.
Negotiations, which have been ongoing since November, center around critical issues such as crew scheduling, rail safety, and worker fatigue. The union, however, has expressed frustration, noting the increasing likelihood of a lockout.
While both railroads remain operational in the U.S. and Mexico, the situation in Canada remains precarious. The trucking industry may absorb some of the freight volumes, but experts, including Windau, caution that it would not be able to replace the full capacity of the railroads.
With contracts having expired at the end of 2023, the pressure is mounting for both sides to reach a resolution before significant damage is done to Canada’s economy and its reputation.
