What Canada’s Rail Shutdown Could Mean for Trade

Canada’s two main railroads shut down on Thursday after contract talks with a labor union failed to reach a deal, forcing businesses in North America to grapple with yet another big supply chain challenge after several years of such disruptions.

The sprawling networks of Canadian National and Canadian Pacific Kansas City are crucial to Canada’s economy and an important conduit for exports to the United States, Mexico and other countries. The stoppage is forcing companies to find other modes of transport, but for some types of cargo, like grains, there are no practical alternatives to railroads.

“The longer this goes on, the impacts are going to be extremely painful for supply chains, especially for products that don’t have alternative modes of transport,” said Brian Whitlock, an analyst at Gartner, a research firm.

Canadian National’s network extends into the United States, and Canadian Pacific Kansas City has operations in the United States and Mexico. The companies’ networks outside Canada are still operating because their American and Mexican workers are covered by different labor agreements.

Canada has recent experience with rail labor disruptions. Strikes in 2015 and 2019 ended in days. The country’s federal government has the power to press the rail workers union, the Teamsters Canada Rail Conference, and management to accept an arbitrated settlement.

But the government has declined to step in this time, at least so far. Prime Minister Justin Trudeau and his Liberal Party rely on the New Democratic Party, which was partly founded by organized labor, for the parliamentary votes it needs to stay in power.