Canada's looming rail strike poses threat to U.S. supply chains
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Labor strikes could shutter Canada's two biggest rail companies, Canadian National (CN) and Canadian Pacific Kansas City (CPKC), as soon as Thursday.
Why it matters: A strike would hit Canada's economy, and ripple out into the U.S. — potentially reigniting inflation, just as it's easing and the November election looms.
The big picture: The world's second-largest country by area, Canada depends on freight rails to transport food, oil and coal — and people. A strike would disrupt commuter rails, too.
- Any prolonged labor stoppage would hit supplies of grain, fertilizer, lumber and steel — potentially driving up prices of food, construction materials and autos, says Brendan LaCerda, a senior economist with Moody's Analytics.
- As one of the world's largest fertilizer suppliers, a work stoppage could also impact the global food supply.
- "Canada is approaching an economic precipice and time is dwindling," LaCerda, writes in a note out Wednesday.
State of play: Talks between the rail operators and the Teamsters union — which represents nearly 10,000 train conductors, locomotive engineers, and rail traffic controllers, have been happening since their labor agreements expired at the end of 2023.
- Earlier this week, one of the rail companies, CPKC, said it would lockout workers starting at midnight on August 22 — meaning people can't go to work or get paid.
- In response, the Teamsters said they would strike beginning on Thursday if a deal cannot be reached.
- Their disagreement is over worker scheduling demands and safety, per the Teamsters.
- "Nothing CPKC has put forward would compromise safety in any way," the company's CEO said in a statement.
What we're watching: Business groups are urging the Canadian government to intervene.
- "Significant two-way trade and deeply integrated supply chains between Canada and the United States mean that any significant rail disruption will jeopardize the livelihoods of workers across multiple industries on both sides of the border," U.S. Chamber of Commerce President Suzanne Clark said in a statement this week.
Between the lines: It's unprecedented for both companies, which make up 75% of the rail industry in Canada, to be negotiating labor contracts in the same year.
- The situation gives the unions more leverage to drive a harder bargain.
- "The calendar is maximizing their negotiating power," LaCerda says.
What's next: The Canadian government does have the power to force the sides into arbitration, foreclosing on any strike, similar to what happened in 2022 when U.S. rail workers threatened a work stoppage.
Canada's legislature could also force striking employees back to work; as happened in 2012.
- So far they've stayed out of it — preferring to let the parties hash things out. Prime Minister Justin Trudeau's government is particularly reliant on the support of labor unions, Reuters reports.
Editor's note: This story has been updated with an additional statement and more details.
