In Canada, the freight train strike that began last Thursday is wasting $250 million a day. And if the protest were to last two weeks, it would mean a loss of $3 billion in GDP and 50,000 jobs. The strike by the two main railway companies, Canadian National Railway and Canadian Pacific Kansas City, has interrupted much of the freight traffic. Agri-food exports to North America and several key domestic production chains are at risk. The unions have been at the negotiating table for months. Workers are demanding wage increases and safer working conditions and complain about grueling shifts that increase the risk of train accidents. The companies, on the other hand, claim to have proposed an agreement to increase safety and the balance between private life and work. The positions remain distant and so the strike began.
The immediate economic impact is estimated at a loss of $250 million per day for a country struggling with weak growth. (+1.7% in the first quarter of 2024 and growth expectations of 1.2% below the forecasts made in the spring), a record unemployment and high inflation. Citizens and businesses have been dealing with high interest rates for years, only last June the first cut by the Central Bank arrived.
And now a prolonged freight strike could be the final straw. A two-week strike would result in a loss of $3 billion in nominal GDP; four weeks would reduce GDP by $10 billion this year.
The most significant consequences are on agriculture. A weeks-long halt to the transportation of grain, fertilizer and raw materials would grind the industry to a halt. And the wave of crisis would involve food processing plants and chemical companies. Canadian rail freight is worth more than $380 billion, and most of that cargo moves with the two striking companies. A crisis in Canada would drag the United States down with it. About half of Canada’s exports to its neighbor, including grain, chemicals and auto parts, are shipped by rail. The lack of supplies would slow down U.S. supply chains, impacting prices and the availability of essential goods beyond the Canadian border. The blockage does not currently affect passenger transport in Canada, but if it continues, it would certainly also affect thousands of people in cities like Montreal and Toronto.
This is not the first time that Canadian rail companies and unions have clashed. In 2015, the strike lasted only two days, thanks to the intervention of the central government. And many are now calling for a move by Prime Minister Justin Trudeau. Time is of the essence: a quick resolution would limit the damage, but every day without an agreement pushes Canada closer to recession.
