Canada’s Major Railways Have Come to a Complete Standstill. Here’s What You Need to Know

TORONTO (AP) — Canada’s two largest railways are at a standstill after an ongoing labour dispute could not be resolved by a Thursday night deadline.

Canadian National and CPKC have halted all of their trains in Canada and stopped shipping to the U.S. after failing to reach new agreements with the Teamsters Canada Rail Conference union. The standoff could cause significant economic damage to businesses and consumers in both countries, which rely on billions of dollars of goods transported by trains each month.

The big questions are how long the shutdown will last and whether the government will step in. Here’s what you need to know.

What led to the closure?

It comes down to an employment contract dispute.

CPKC and CN laid off nearly 10,000 engineers, conductors and dispatchers after the deadline passed. As a result, no trains are running in Canada, but both railroads continue to operate in the United States and Mexico.

Negotiations resumed Thursday, with picketing already underway. Both railroads have said they would end the lockout if the union agrees to binding arbitration. But in a Thursday message to X, Paul Boucher, president of the Teamsters Canada Rail Conference, accused CPKC and CN of “holding the Canadian economy hostage” to pressure the government to impose binding arbitration.

Both railroads are offering wage increases for what are already well-paid jobs that they say are in line with other recent deals in the industry. Negotiations have stalled largely over issues related to work schedules and concerns about rules designed to prevent fatigue among train crews.

CN has been negotiating with the Teamsters for nine months, while CPKC has been trying to reach a deal for a year, the unions said. Although the stoppage came Thursday, both railroads began shutting down shipping networks last week.

What are the implications for businesses and travelers?

Billions of dollars worth of goods are moved by rail between Canada and the U.S. each month. The current impasse will halt all CPKC and CN rail traffic in Canada, as well as shipments from those two railroads into the U.S., although trains in the U.S. and Mexico will continue to operate.

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Both businesses and consumers will feel the consequences.

Chemical companies and food distributors will be the first to be hit. The railways had already stopped accepting new shipments of hazardous materials when they began to gradually close last week, to prevent dangerous goods from becoming stranded along the tracks. Perishable goods were also put on hold early.

But Greg Moffatt, executive vice president of the Chemistry Industry Association of Canada, said most chemical manufacturers have said they can last about a week. It just depends on how much inventory they have on hand, how much space they have to store their products and whether they can scale back production.

The auto industry could also face problems. If the shutdowns last longer than two weeks, people looking to buy new vehicles in the U.S. and Canada could face shortages, industry analysts say.

That’s because General Motors, Stellantis, Ford, Honda and Toyota either assemble entire vehicles in Canada or ship engines and other parts across the border. About 80 percent of vehicles assembled in Canada are shipped to the U.S., much of it by rail. Michael Robinet, executive director at S&P Global Mobility, notes that most auto assembly plants operate on “just-in-time” inventories of parts, making it difficult to build up inventory farther away.

Automakers could try to divert vehicles built abroad to U.S. ports, or ship parts across the border by truck, but capacity is limited, Robinet said.

And it’s not just freight. More than 30,000 commuters in Vancouver, Toronto and Montreal were the first to feel the pinch of the lockdowns. They were left scrambling Thursday morning to find ways to get to work because their commuter trains aren’t running while CPKC is closed.

What is the government doing?

Prime Minister Justin Trudeau refused to immediately force the parties into binding arbitration, fearing it would offend the Teamsters Canada Rail Conference and other unions.

But that could change.

“We don’t take this lightly because Canadians across the country are concerned about it,” Trudeau told reporters in Sherbrooke, Quebec, on Thursday, adding that “we’ll have more to say soon” about finding a solution.

Still, entrepreneurs were angry about the lack of early government intervention.

“When you completely shut down the coast-to-coast supply chain, nothing good can come of it,” said John Corey, president of the Freight Management Association of Canada. “It’s infuriating. People are going to lose their jobs.”

How long can this go on?

It is difficult to predict. Most previous Canadian rail shutdowns lasted only a day or two and usually involved only one of the major railways, but some lasted as long as eight or nine days.

Edward Jones analyst Jeff Windau said the biggest problems will come if the lockdown continues. But many companies will likely be able to weather a brief disruption, in part because of the changes they made to their supply chains after the pandemic, he said.

However, the pressure for government intervention will increase as the exclusion continues, and the impact will be greater as both rail lines are at a standstill.

What happens now?

All eyes are currently on the ongoing contract negotiations and whether there will be any significant government intervention.

“It won’t be long before it becomes untenable,” said Daniel Béland, a political science professor at McGill University, who pointed to the potential economic implications for both Canada and the U.S. “The pressure to end it as quickly as possible is coming from both sides of the border and can only increase rapidly if and when the situation on the ground deteriorates.”

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Funk reported from Omaha, Nebraska. Associated Press writers Wyatte Grantham-Philips in New York and Tom Krisher in Detroit contributed.

Rob Gillies and Josh Funk, The Associated Press