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The two major railway companies Canada On Thursday, the company locked out about 10,000 union members after labor talks collapsed, halting freight traffic in a move expected to cost the economy hundreds of millions of dollars a day and threatening major disruptions to North American supply chains.
Canadian National Railway (CN) and Canadian Pacific Railway Kansas City (CPKC) have both locked out workers represented by the Teamsters Canadian Railway Congress (TCRC) after failing to reach an agreement with the unions after nine months of negotiations.
Both sides are blaming each other for the breakdown.
A Canadian National Railway train car at MacMillan Yard in Toronto on Aug. 20, 2024. (Cole Burston/Bloomberg via Getty Images/Getty Images)
Industry, agriculture, retail and trade groups have warned in advance that the shutdown of work on the rail system could have a major impact on trade between Canada and the United States, with repercussions for other parts of the continent, depending on how long it lasts.
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Anderson Economic Group estimates that if the outage lasts three days, it could cost the Canadian economy $303 million ($403 million Cdn). If it lasts a week, the loss would exceed $1 billion.
The company said initial estimates suggest the cost would be borne almost entirely by the Canadian economy, but that U.S. ports and shippers would see some gains while the U.S. would incur some losses from the disruption.
A Canadian Pacific Kansas City Corporation train car at Canadian Pacific Railway’s Toronto Yard in Toronto, August 20, 2024. (Cole Burston/Bloomberg via Getty Images/Getty Images)
“The shutdown of Canadian rail services will hit parts of Canada hard, especially those that rely on port shipments, agricultural products, sensitive chemicals and energy products,” said Patrick Anderson, president and CEO of Anderson Economic Group. “We expect the U.S. economy to remain largely unaffected through the first week, except for those regions that rely on Canadian agricultural and energy products.”
In the United States, the biggest losses are expected to be to Canadian grain and agricultural products due to the suspension of Canadian rail freight traffic, which the USDA said could reach $40 million per day, AEG said.
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Americans who rely on Canadian rail transport for propane gas and other petroleum products will also feel the effects. If the outages last more than a few days, it could disrupt supply lines for automobiles and other industrial products. And extended delays to fertilizer shipments from Canada could affect cross yields and raise the cost of packaging materials and other goods.
The longer the strike continues, the more pressure there will be on the rail company and the union to reach an agreement. Prime Minister Justin Trudeau’s government is already facing calls to step in and force the two sides to reach an agreement.
“It’s extraordinary in this case that the Trudeau government, which is very liberal, didn’t intervene, while the U.S. government, which has been neutral on these issues for 70 years, actually had its president go to the picket line with the UAW,” Anderson said in an interview with Fox Business. “So this is a real shift in the way our national leaders are doing things.”
Locked out rail workers demonstrate outside the CN Rail Brampton Yard on August 22, 2024 in Brampton, Ontario, Canada. (Ian Wilms/Getty Images/Getty Images)
Anderson said Canadians tend to be more diplomatic and consensus-building than U.S. union leaders, but “it’s 2024 and rail is a very important industry for Canada. They’re looking across the border, they’re seeing the UAW being very combative and being successful and they can’t help but wonder if they can do that too.”
Jason Greer, founder of Greer Consulting and a labour expert, expects the labour dispute to lead to a prolonged shutdown of rail freight traffic in Canada and ultimately lead to U.S. intervention.
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“I think this is going to continue for some time because both parties are at an impasse,” Greer told Fox Business. He expects President Biden will reach out to the Canadian government about the situation because rail disruptions could ultimately have a “devastating impact on the U.S. economy.”
