Canada’s Looming Rail Strike Could Cripple U.S. Supply Chain: What You Need to Know

A potential work stoppage at Canada’s two largest railroads, Canadian Pacific Kansas City (CPKC) and Canadian National (CN), is threatening to disrupt the U.S. supply chain next week. As negotiations with the Teamsters union stall, the railroads are preparing for a possible lockout or strike that could significantly impact cross-border trade and the broader economy.

The Growing Threat of a Work Stoppage

CPKC and CN, which collectively transport millions of tons of freight daily, have begun shutting down key parts of their shipping networks. Both railroads have already stopped accepting certain shipments, including hazardous materials and refrigerated goods, as they brace for a potential labor stoppage. On Tuesday, CPKC will halt all shipments originating in Canada and any U.S. shipments destined for Canada, further escalating the situation.

The threat of a lockout or strike is now more imminent than ever, with CPKC and CN poised to lock out nearly 10,000 Teamsters Canada workers if a deal is not reached by Thursday. The stakes are high, as the two railroads handle around 40,000 carloads of freight daily, valued at approximately $1 billion.

Potential Impact on the U.S. Supply Chain

If the work stoppage extends beyond a few days, it could have severe consequences for the U.S. supply chain. Key industries, including automotive, chemicals, forestry, and agriculture, would be among the hardest hit. With the harvest season approaching, the disruption could lead to significant delays and shortages, affecting everything from food supplies to industrial materials.

Jeff Windau, an industrials analyst at Edward Jones & Co., emphasized the potential severity of the situation, noting that the railroads are integral to the economy. “If something would carry on more of a longer-term nature, then I think there are some significant potential issues just given the amount of goods that are handled each day,” Windau said.

While the trucking industry may have some capacity to absorb the overflow, it cannot fully compensate for the volume typically handled by the railroads. This shortfall could exacerbate supply chain bottlenecks, leading to increased costs and delays for businesses and consumers alike.

The Sticking Points in Negotiations

The ongoing labor dispute centers on several critical issues, including crew scheduling, rail safety, and worker fatigue. These concerns have been at the forefront of negotiations since the contracts expired at the end of 2023. Despite months of talks, there has been little progress, with both sides digging in on key demands.

The union has expressed frustration with the railroads’ demands, particularly regarding quality of life for workers who face grueling schedules and a lack of paid sick time. These issues nearly led to a U.S. rail strike two years ago before Congress intervened. While U.S. railroads have since made strides in offering paid sick time and improving schedules, the situation in Canada remains unresolved.

What’s Next?

As negotiations continue, the possibility of a lockout or strike looms large. Both CPKC and CN have stated their commitment to reaching a resolution, but the path forward remains uncertain. A prolonged work stoppage could have far-reaching implications, not just for Canada but for the U.S. and beyond.

Businesses that rely on cross-border trade should prepare for potential disruptions by exploring alternative shipping methods and building up inventories where possible. As the situation evolves, staying informed and proactive will be key to mitigating the impact of this potential supply chain crisis.

In the coming days, all eyes will be on the negotiations between the railroads and the Teamsters union. Whether a resolution can be reached in time to avoid a work stoppage will determine the extent of the disruption to the U.S. supply chain and the broader North American economy.