Labor Dispute Halts Rail Freight in Canada, Raising Supply Chain Concerns

Rail freight traffic in Canada came to a standstill early Thursday as the country’s two main rail companies locked out about 10,000 employees, a move that could cause supply chain disruptions in the United States and serious economic consequences within Canada.

The move follows months of contract talks that failed to reach an agreement. The two companies, Canadian National and Canadian Pacific Kansas City, said before the lockout that their extensive routes within the United States would continue to operate, but many businesses there are likely to be affected.

About 6,500 containers enter the United States by rail from Canada every day, according to the Railway Association of Canada, an industry lobbying group. That includes cargo from Asia and Europe that lands in Canadian ports. Rail shipments into Canada from the United States will also be halted.

For Canada’s export-dependent economy, a prolonged shutdown could have severe economic repercussions. The railway association estimates that half of all Canadian exports are moved on trains and that railroads carried 380 billion Canadian dollars, about $279 billion, worth of goods during 2022.

The effect on intercity passenger trains, which mostly use Canadian National’s tracks, and on commuter lines may be less pronounced. And while the railways move grains and other farm products for global export, they transport relatively few of the food products found in Canadian grocery stores.

Canadian Pacific Kansas City said that its operations in Mexico, which largely handle traffic to and from the United States, would also continue normal operations.