State of Freight Canadian rail shutdown leaves billions in U.S. trade stranded, with economic impact to grow day by day

August 22

by Austin Wright

CNBC
Lori Ann LaRocco
Aug. 22, 2024

The highly integrated trade relationship between the Canadian and U.S. economies has left billions worth of cargo in limbo after over 9,000 freight rail workers represented by the Teamsters Canada union were locked out by Canadian National Railway and Canadian Pacific Kansas City after months of failing negotiations.

Rail cross-border trade with the U.S. is at a standstill, which according to the U.S. Department of Transportation, accounted for 14% of total bilateral trade of $382.4 billion between the countries for the first half of the year. Approximately $572 million in container trade arrives daily in the U.S. from Canada, according to U.S. Census data.

Rails are a large component of logistics for companies, from Dow Chemical to automakers in Detroit like Ford and General Motors, which use the rails to transport auto parts. Retailers such as Walmart, Target, Nike, Procter & Gamble and Canada Goose also import some of their goods into Canadian ports which are then transported by rail and truck. According to Everstream Analytics, 66% of cargo arriving at the Port of Vancouver is moved by rail to final destinations in Canada or in the U.S. Midwest, which includes fertilizer, iron ore, grain, cement, salt, potash, coal, cars, wood/timber as well as containers loaded with consumer goods or intermediate parts.

Paul Brashier, vice president of global supply chain at ITS Logistics, warned of higher trucking rates as customers look to move their rail-bound freight by road.

“Operations will grind to a halt and everything will have to move to the road for both domestic and international containerized freight,” Brashier said. “This demand can drive rates through the roof.”

Logistics experts tell CNBC they are still hopeful of a quick settlement, either through a negotiated contract settlement, or Canadian government intervention (such as action by Parliament).

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