Canadian freight railways closed due to union dispute

Canada’s two largest rail companies locked out nearly 10,000 unionized workers Thursday after labor talks broke down, leading to a freight shutdown expected to cost the economy hundreds of millions a day and threatening disruption significant to the North American supply chain.

Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) have both walked out on workers represented by the Teamsters Canada Rail Conference (TCRC) after failing to reach an agreement with the union after nine months of negotiations.

Both sides blame each other for the failure.

A Canadian National Railway Co. train car. at MacMillan Yard in Toronto on August 20, 2024. (Cole Burston/Bloomberg via Getty Images/Getty Images)

Industry, agriculture, retail and trade groups warned early that any work stoppage in the rail system could result in a substantial impact on trade between Canada and the U.S. and could reverberate elsewhere on the continent, depending on how it lasts.

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The Anderson Economic Group estimates the shutdown would cost the Canadian economy $US303 million ($403 million CAN) if it lasts three days. If extended to a week, costs would exceed $1 billion.

The firm said the costs in its initial estimates would be borne almost entirely by the Canadian economy, but the U.S. would see some losses, while U.S. ports and shippers would see some gains from the disruption.

A Canadian Pacific Kansas City Ltd. train car at the Toronto Canadian Pacific Railway Yard in Toronto August 20, 2024. (Cole Burston/Bloomberg via Getty Images/Getty Images)

“Canadian rail shutdowns will severely impact parts of Canada, particularly those areas that depend on shipping from ports, agricultural products and sensitive chemicals and energy products,” said Patrick Anderson, director and CEO of Anderson Economic Group. “We expect the US economy to largely shrug off the impact in the first week, outside of local areas dependent on Canadian agriculture and energy products.”

In the US, the shutdown of rail freight from Canada is expected to cause the most significant loss of grain and agricultural products originating in Canada, which the USDA says could cost up to $40 million a day, AEG said.

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It will also be felt by Americans whose homes depend on propane or other petroleum products shipped via Canadian rail. If the shutdown extends beyond several days, there could also be disruptions to supply lines for manufactured goods, particularly automobiles. And extended Canadian fertilizer delays could hurt cross yields and increase the cost of packaging and other goods.

The longer the work stoppage lasts, the greater the pressure will be on the railways and the union to strike a deal, and the Canadian government led by Prime Minister Justin Trudeau is already facing calls to step in and force a deal between the two parts.

“It is unusual that in this case the very liberal Trudeau government has not intervened, while the United States government, which has had a 70-year history of remaining neutral on these things, has actually asked the President Unite to go to a picket line with the UAW,” Anderson told FOX Business in an interview. “So this is a real change in style by the country’s leaders.”

Locked-out rail workers demonstrate outside the CN Rail Brampton site August 22, 2024 in Brampton, Ontario, Canada. (Ian Williams/Getty Images/Getty Images)

Anderson said Canadians tend to be more diplomatic and deal-making than U.S. labor leaders, “but it’s 2024 and rail is very important in Canada. And they can’t help but look across the border and see the success the UAW has gotten to be very militant and think they might try that.”

Labor expert Jason Greer, founder of Greer Consulting, says he expects an extensive shutdown of Canadian rail freight because of the labor dispute and that the U.S. could eventually get involved.

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“I think this is going to take some time because both sides are at such an impasse,” Greer told FOX Business. He predicts that President Biden will contact the Canadian government about the situation because the rail disruptions could “have a terrible impact on the US economy.”