Rail Freight Lockout in Canada: Economic Impacts and Supply Chain Disruptions

Rail Freight Standstill in Canada: Implications and Consequences

Early Thursday, rail freight traffic across Canada ground to a halt as the nation’s two primary rail companies, Canadian National and Canadian Pacific Kansas City, implemented a lockout affecting approximately 10,000 employees. This drastic measure stemmed from an ongoing labor dispute and poses significant risks of supply chain disruptions not only within Canada but also in the United States, which could lead to serious economic ramifications.

The lockout follows months of unsuccessful contract negotiations between the rail companies and their workforce. While both companies had previously asserted that their extensive rail routes operating within the U.S. would remain functional, many American businesses are likely to experience adverse effects. According to the Railway Association of Canada, an industry lobbying group, around 6,500 containers are transported daily from Canada into the United States. This cargo includes goods originating from Asia and Europe that arrive at Canadian ports. In addition, rail shipments moving into Canada from the United States will also be disrupted.

Given Canada’s economy is heavily reliant on exports, a prolonged shutdown of rail services could result in severe economic consequences. The railway association estimates that nearly 50% of all Canadian exports are transported by train. In 2022 alone, railroads facilitated the movement of goods valued at approximately 380 billion Canadian dollars (about $279 billion).

While the impact on intercity passenger services, which predominantly utilize Canadian National’s tracks, and commuter lines may be somewhat less significant, the implications for freight transport are far-reaching. Moreover, although railways play a critical role in moving grains and other products for global export, they carry a relatively small amount of the food products found in Canadian grocery stores.

It is also worth noting that Canadian Pacific Kansas City has stated that its operations in Mexico, which primarily manage traffic to and from the United States, will continue as normal during this period of disruption.