Off The Rails

Some of the biggest news today in the US has reporters turning their head North……to Canada of all places. With a looming strike at Canadian National and Canadian Pacific Kansas City ( CN and CPKC ) it has grabbed the attention of US lawmakers.

This strike has very large implications for Canadians – and Americans alike. Long gone are the days where freight recognized the constraints of a border crossing. The Canadian and US economies are so intertwined these days that a freight stoppage in Canada will effect a lot more than Canada. US rail companies has the US Chamber of Commerce involved along with a handful of US regulators. Here is why your mortgage mind should care:

Right now there are billions of dollars a day of trade that snake across the US and Canada border. Companies do business on both sides of the border. What harm does this do going forward? Are US companies more likely to only deal with US shippers, US companies and US part suppliers if they cannot reliably count on another country to get labour disputes settled? If this strike goes ahead, it could cause irreparable harm to the Canadian economy in the future.

Our good old friend – or foe – inflation. Rail companies have already started declining shipments in preparation for Thursday’s looming strike. Being as over 25% of Canadian trade moves by rail, that means a lot of products will not be getting to store shelves. That means a supply shortage. The last time we had a supply shortage in 2021 it caused inflation to eventually go up to damn near 9%. It takes rail lines 5 to 6 days to get things in order for every one day of strike. So, if we see a 2 week strike, that could mean it takes almost 85 to 90 days to get shit back in order. 90 days with low supply, 90 days of potential price gouging, 90 days of not being able to find essentials – especially in more remote areas of the country. And you thought fruits and vegetables were expensive now? Just wait.

Labour market: Remember that not only is it the people who work the rail lines, of which it is estimated around 6300 workers that will be without pay, but also shippers receivers, truckers that haul to rail lines, auto plant workers who load train cars, the list goes on and on. As of today, C.H. Robinson, an absolutely massive logistics company has ordered ships bound for Canadian ports to seek alternative ports in the US where they can reliably predict the ships will be unloaded. What if Maersk orders the same? What if Hapag-Lloyd considers a similar move? What if Evergreen copies the competition and makes the same orders? Canadian ports employ 71,000 people directly, and 213,000 indirectly. That is a lot of people that have no work all of a sudden. More over, what if these companies find that US ports are better, more accommodating, etc.? It is like the time you were too busy to deal with a client, and they went to the bank, and the bank kept them for life.

Commuting. Very few people realize than CN and CPKS own a lot of rail lines that commuter trains run on. You thought Toronto traffic was a shit show before? Wait until VIA and some Go trains cannot run on those CN or CPKS lines. Let the fun begin. How will people get to their jobs? How will commuters get where they need to go? How many hours will be wasted in Toronto, Montreal, and Vancouver gridlock with an estimated 25,000 more vehicles a day? We have all heard lines about how waiting at a train crossing costs the economy X dollars in productivity , how much productivity will be lost with everyone stuck in gridlock traffic for hours and hours on end? Plus, all of those cars pollute a lot from what I am told, so that certainly cannot be good for the environment, right?

Knock on effects. Sure, we can all skip some food items, we can put off some daily items for so long, but what about all of the items that move by rail that we cannot put off? A lot of propane from West to East moves on rail. Without propane people cannot heat their homes, thousands of businesses and industry that rely on propane to run their business cannot function, the list is quite long. What about homebuilders that need the lumber that is moved by rail? Remember Canada was going to build some 8 trillion homes, or something like that? How exactly will that happen without the rail lines to move lumber? When major commodities like oil, lumber, coal, precious metals, are not moved, it puts a massive dent in Canadian GDP.

No matter what angle you approach it from, the rail line strike will be painful. Hopefully none of your clients work for the railways or related businesses and find themselves on layoff or out of a job before closing. What this strike will do if it gets going for any length of time is start to play with data you see reported. Inflation could tick up, but be temporary. GDP could take a nosedive, and also be temporary – or transitory as we used to call those things before central bankers ruined the term for us all. Don’t let a lower or higher number form your basis for your entire business going forward when the number may have had some outside influence on it. Data will be pieced together if the strike lasts too long, and will be a little warped, so take a second to breathe before jumping for joy, or jumping off a building.

I hope that cooler heads can prevail and that a strike is averted, but at this stage it looks grim. Too much lasting damage could be done by a strike. Remember than Canada is an exporting country, and we need our customers, whether the USA next door or the company half way around the world to have faith that we can keep our shit together. I am a little scared as it is time for the adults in the room to come up with some adult type of answers. Our Federal government has not shown the best track record at making big decisions when it counts, and I fear that we will let the children sit at the adults table. This is no time for virtue signaling, feelings or emotions. Now is the time to get real solutions for real people before it changes the lives of real Canadians – potentially for years to come. It is time for 2 sides to come together and hammer out a deal that while not perfect, is manageable for both sides to walk away thinking they won. It is time to restore the worlds faith in Canada’s ability, and that will lead to continued progress, and ultimately a great middle class.

If we don’t see the adults come out to do their job, then we could be in for a rough ride. It will be the first time in recorded history that the railways were the cause of Canada going off the rails.