Canadian Pacific Shutdown Will Exacerbate Supply Chain Problems for the United States

Infrastructure is one of those things that no one notices until it stops working; just ask Texans about their power grid issues last year. Included in our infrastructure are not just the physical bridges, roads and railways, but also the human capital that uses them to transport goods. The only thing ignored more than infrastructure is whatever is happening in Canada. Last weekend, these two vectors came together in a way that will soon have Americans paying close attention.

Canadian Pacific (CP) shut down this last weekend because of labor issues. CP is a railroad transportation company whose two biggest products transported are oil and fertilizer. This is important because there is also a war going on in Ukraine that has resulted in severe sanctions against Russia, which is an exporter of both commodities. The CP strike will ensure these vital resources will not be moving anywhere.

Fertilizer was already rising in price before the conflict; the same goes for fuel. Supply chain issues also were jarring the system all last year. The labor strife will only further exacerbate the problem as CP has routes all through the United States.

Simple economics states that a decrease in supply, regardless of whether it is on the manufacturing side or because of transportation issues, raises prices. The strike comes as American consumers have already been crushed by the worst inflation in decades.

To make matters worse, there is a potential strike brewing at the western ports of the United States. With supply chain woes rippling through the country, and a feckless Transportation secretary, unions are seeing that the current moment provides them with ample leverage to make demands.

The Biden administration will do everything it can to avoid further disruptions, given that it has very little political capital at the moment. The Presidents poll numbers continue to plummet. Although a strike may benefit the port workers, it would further damage the economy.

It is unlikely that Biden or his cabinet will exhibit the type of leadership that would avoid further disruptions in the supply chain. For the moment, it looks like normal Americans will be enduring the worst of these changes.