Canada’s two largest railroads, Canadian Pacific Kansas City and Canadian National, are taking steps to pause their shipping operations due to a labor dispute with the Teamsters union, potentially leading to lockouts or strikes that could disrupt trade with the U.S. The railroads have ceased accepting certain shipments of hazardous materials and refrigerated products. They are set to lock out Teamsters Canada workers starting Thursday if agreements are not reached. CPKC will halt shipments originating in Canada and the U.S., whereas Canadian National has stopped importing containers from U.S. partner railroads.

Jeff Windau, an industrials analyst at Edward Jones & Co., anticipates that any work stoppages will likely be short-lived, but prolonged disruptions could have a significant impact on supply chains, affecting various sectors like fully built automobiles, chemicals, forestry products, and agricultural goods, especially during the upcoming harvest season. The railroads move approximately 40,000 carloads of freight daily, valued at around $1 billion.

Although the labor dispute mainly affects Canadian operations, both railroads have extensive networks in the U.S., including CPKC serving Mexico. CPKC expressed its commitment to avoiding a work stoppage to prevent harm to Canada’s economy and reputation, while also preparing for a potential rail service interruption by shutting down the network temporarily to remove dangerous goods. Negotiations between the railroads and the union are ongoing, with talks focusing on crew scheduling, rail safety, and worker fatigue.

As negotiations have been ongoing since last November, and contracts expired at the end of 2023, the union highlights the railroads’ demands as the primary obstacles. Windau pointed out that the trucking industry, although having excess capacity, may not fully compensate for the railroads’ shipping volume. Discussions between the railroads and the union are set to continue, with hopes for a resolution that allows operations to resume smoothly for the benefit of customers and the economy.