Canada’s two major freight railroads, Canadian National (CN) and Canadian Pacific Kansas City Southern (CPKC), have shut down their operations due to a labor dispute with the Teamsters union, resulting in 9,000 workers being locked out. This shutdown could have a significant impact on both the Canadian and US economies, as nearly a third of the freight handled by these railroads crosses the US-Canadian border. Industries such as agriculture, autos, home building, and energy could be disrupted depending on how long the shutdown lasts.
CPKC stated that the shutdown was necessary to protect Canada’s supply chains and prevent further uncertainty and disruption, especially during the upcoming fall peak shipping period. The close economic ties between the US and Canada are evident in how many industries rely on the free movement of goods across the border for their operations. Examples include potential temporary shutdowns at US auto plants due to a lack of Canadian-made components, as well as shortages of critical materials like fertilizer and chlorine for water treatment plants near the border.
This is the first time that both major Canadian railroads have shut down simultaneously due to a labor dispute, with the most recent industry work stoppages being a 60-hour strike at Canadian Pacific in 2022 and a nine-day strike at Canadian National in 2019. The current lockout by management is different from a strike, as workers are being prevented from reporting for duty. CPKC spokesperson Patrick Waldron emphasized the importance of reaching a resolution now to avoid more severe consequences during the crucial fall shipping period.
The Teamsters union claims that the railroads’ demands would compromise rail safety and increase risks, while the companies argue that their proposed changes actually provide greater safety protections than required by Canadian regulations. Both sides have been unable to reach an agreement before the deadline, prompting calls for government intervention. The chambers of commerce in the US and Canada have urged the Canadian government to take action to keep the railroads running, citing the potential devastating impact of a rail service stoppage on businesses and families on both sides of the border.
Experts warn of the economic consequences of the railroads’ shutdown, as there is insufficient capacity on trucks to handle the freight typically carried by the Canadian railroads. A three-day strike could result in $300 million of economic damage, while a seven-day strike would exceed $1 billion in losses. Even a shutdown of just a few days could cause significant problems and disruptions, which may take weeks to resolve. The railroads have stopped accepting hazardous material shipments in anticipation of the work stoppage, further contributing to disruptions in supply chains.
The railroads’ management proceeded with the lockout plans to prevent a potential strike with short notice, as required by Canadian law. Unlike in the US, there is no provision in Canadian labor law for the government to intervene and block a strike or lockout to allow for arbitration. Despite discussions between the Labor Minister, union, and management negotiators to reach a deal, the Trudeau administration has so far rejected the option of binding arbitration, sought by the railroads. The situation remains unresolved as both sides continue to advocate for their interests in the ongoing labor dispute.
