Blame Canada! Rail strike impact will ripple across North America

Canada’s two largest rail companies have halted rail shipments after failing to reach an agreement with the union representing their employees.

Canadian Pacific Kansas City and Canadian Railway had until midnight last night to find common ground on a new labor contract with Teamsters Canada, which is seeking better safety guarantees for its members. Both of Canada's major railways locked out 9,300 workers after they failed to agree on a new contract.

The two companies have a virtual monopoly over Canada’s rail network, which moves goods worth $280 billion annually. Fertilizers, grains, and coal are particularly vulnerable to the rail stoppage. Canada’s fertilizer industry alone, for example, stands to lose $50 million a day amid the strike.

Impact on the US. Truckers carry most goods across the border, and they’ve already jacked up fees ahead of increased demand. But rail carries about $100 billion annually between the two countries. US rail giant Union Pacific warned that a Canadian strike would be “devastating.” The auto industry is particularly worried: Canadian trains move components for at least a dozen US plants and 90% of those in Mexico.

What happens next? The minority Liberal government of PM Justin Trudeau has so far been reluctant to force the sides into an agreement or to require the Teamsters to go back to work. In part, that reflects pressure from his left-wing coalition partners, the New Democratic Party. But now that the rails are idle, he may come under more pressure to act.