Canada’s two major freight railroads, Canadian National (CN) and Canadian Pacific Kansas City Southern (CPKC), have shut down operations, locking out 9,000 members of the Teamsters union. This unprecedented move could have significant repercussions on both the Canadian and U.S. economies, as nearly a third of the freight handled by these railroads crosses the U.S.-Canadian border. The shutdown could disrupt key U.S. industries, including agriculture, automotive, home building, and energy, depending on how long it lasts.

CPKC stated that the lockout was necessary to protect Canada's supply chains and prevent more extensive disruptions during the peak fall shipping season. The company emphasized that delaying the resolution of this labor dispute would exacerbate the situation.

The shutdown highlights the close economic ties between Canada and the U.S., with many industries relying on the smooth flow of goods across the border. For instance, U.S. auto plants might face temporary closures if they cannot receive essential parts from Canada, and U.S. farmers could experience fertilizer shortages.

This lockout marks the first time both major Canadian railroads have simultaneously shut down due to a labor dispute. Previous work stoppages included a 60-hour strike at Canadian Pacific in 2022 and a nine-day strike at Canadian National in 2019.

Unlike a strike, where union members refuse to work, this situation involves management instructing Teamsters not to work. CPKC spokesperson Patrick Waldron explained that it was better to halt operations now rather than risk a strike later in the fall, which would have severe consequences during the peak shipping period.

The Teamsters union argues that the railroads' demands would reduce rest periods and increase safety risks. However, the railroads dispute this, claiming their proposals enhance safety protections beyond Canadian regulations. Both companies have blamed the union for the failure to reach an agreement and have urged the Canadian government to intervene and refer the dispute to binding arbitration, a step the government has so far refused to take.

The U.S. and Canadian chambers of commerce have called on the Canadian government to keep the railroads operating, warning that a rail service stoppage would have devastating effects on businesses and families in both countries.

Economists warn that the shutdown could have severe economic consequences, with a three-day strike potentially causing $300 million in damages and a seven-day strike over $1 billion. Even a brief shutdown would create logistical challenges that could take weeks to resolve. Additionally, the railroads had already stopped accepting shipments of hazardous materials to prevent them from being stranded, which has caused some disruptions.

CN spokesperson Jonathan Abecassis explained that the railroads needed to start the shutdown process safely, given the short notice required by Canadian law for a strike. Unlike in the U.S., where labor laws allow the government to block strikes or lockouts, Canada's legal framework does not provide such measures. Canadian Labor Minister Steve MacKinnon has met with negotiators but has not yet referred the matter to binding arbitration, as requested by the railroads.