Employees are seen on a locomotive being moved at the Canadian Pacific Kansas City rail yard in Port Coquitlam, British Columbia, on Monday. A phased shutdown of the networks at Canadian National Railway Co. and Canadian Pacific Railway Ltd. is already underway as the clock ticks down on negotiations with the union representing engineers, conductors and yard workers. Darryl Dyck/The Canadian Press via AP

TORONTO — Canada’s two major freight railroads could halt their trains Thursday if they can’t agree to renewed contracts with the union representing their engineers, conductors and dispatchers. Canada’s government is watching closely and may intervene to prevent widespread damage to the economy.

Prime Minister Justin Trudeau delivers a statement on a potential rail strike following an event in Gatineau, Quebec, on Wednesday. Sean Kilpatrick/The Canadian Press via AP

Both Canadian National and CPKC have been gradually shutting down since last week ahead of the contract deadline of 12:01 a.m. Eastern Thursday and all traffic will stop before then if this isn’t resolved. Shipments of hazardous chemicals and perishable goods were the first to stop, so they wouldn’t be stranded somewhere on the tracks.

As the Canadian contract talks were coming down to the wire, CSX broke with the U.S. freight rail industry’s longstanding practice of negotiating jointly for years with the unions. CSX reached a deal with three of its 13 unions ahead of the start of national bargaining later this year.

The new five-year contract with the Transportation Communications Union, the Brotherhood of Railway Carmen and the Transport Workers Union will provide 17.5% raises better benefits and vacation time for about 1,600 clerks and the carmen who inspect railcars. TCU President Artie Maratea said he’s proud that his union reached a deal “without years of unnecessary delay and stall tactics.”

Canadian Prime Minister Justin Trudeau has been reluctant to force both sides into arbitration because he doesn’t want to offend the Teamsters Canada Rail Conference and other unions, but he urged both sides to reach a deal Wednesday because of the tremendous economic damage that would follow a full shutdown.

“It is in the best interest of both sides to continue doing the hard work at the table,” Trudeau said to reporters in Gatineau, Quebec. “Millions of Canadians, workers, farmers, businesses, right across the country, are counting on both sides to do the work and get to a resolution.”

Numerous business groups have been urging Trudeau to act.

Trudeau said the labor minister met with both sides in the Canadian National talks in Montreal on Tuesday and would be on hand for the CPKC talks in Calgary, Alberta. The talks at both railroads were ongoing on Wednesday.

The negotiations are stuck on issues related to the way rail workers are scheduled and concerns about rules designed to prevent fatigue and provide adequate rest to train crews. Both railroads had proposed shifting away from the existing system, which pays workers based on the miles in a trip, to an hourly system they said would make it easier to provide predictable time off.

The railroads said their contract offers have included raises consistent with recent deals in the industry. Engineers make about $150,000 a year on Canadian National while conductors earn $120,000, and CPKC says its wages are comparable.

Nearly 10,000 workers are covered by these contracts.

Similar quality-of-life concerns about demanding schedules and the lack of paid sick time nearly led to a U.S. rail strike two years ago until Congress and President Biden intervened and forced the unions to accept a deal.

Countless businesses that rely on railroads to deliver their raw materials and finished products would be hurt if the trains do stop. All rail traffic in Canada and all cross-border traffic with the U.S. would stop, although CN and CPKC’s American and Mexican operations would continue.

Manufacturing companies may have to scale back or even shut down production if they can’t get rail service, while ports and grain elevators will quickly become clogged with shipments waiting to move. And if the dispute drags on for a couple of weeks, water treatment plants all across Canada might have to scramble without new shipments of chlorine.

“If railways are not picking up the goods that are coming in by ships, then pretty soon your terminals get filled up. And at that point you cannot take any vessels at the terminal anymore,” said Victor Pang, chief financial officer at the Vancouver Fraser Port Authority.

He pointed to the 13-day strike by 7,400 British Columbia dockworkers last summer, which manufacturers said blocked the flow of $500 million Canadian (US$368 million) worth of goods each day.

Some companies would undoubtedly turn to trucking to keep some of their products moving, but there’s no way to make up for the volume railroads deliver. It would take some 300 trucks to haul everything just one train can carry.

In addition to the potential business impact, more than 32,000 commuters could be stranded in Toronto, Montreal and Vancouver because those trains operate over CPKC railroad tracks.

In the United States, the major railroads have all made efforts to address worker concerns, and CSX led the way with the first paid sick time deal. The Jacksonville, Florida-based railroad also eased its strict attendance policy and announced new efforts to work with its unions.

The current national contracts for U.S. rail workers expire at the end of this year. This will be the first time TCU members have a new agreement in place before the old one expires, and the deal includes the first improvements to the vacation provisions in more than 50 years. If the other rail unions get a better deal later, this TCU pact will be updated.