Canada Is Building A Trade Network Around America. Its Namesake Railroad is Ready To Cash In

Canada’s leader Prime Minister Mark Carney has become, to some, the leader of the Western world’s opposition to all things President Donald Trump. The former head of the Bank of England is forging ahead with new security and economic relations designed either simply to piss off Trump, or to diversify away from the U.S. economy. One strategy is a West Coast Canadian railroad that goes directly to Mexico, making no planned stops along the way.

There is no love lost between the two countries at the moment, so bypassing the U.S. for trade, including by taking a train across U.S. territory to do so, seems right on script. Recently, tensions between the U.S. and Canada reached new heights, with Trump threatening to block Bombardier aircraft sales in the U.S. unless the Canadian jet maker moved some production to the U.S. The White House also announced import bans on certain Canadian dairy products, motorcycles and most alcoholic beverages (a tit-for-tat as Canadian provinces did this first) while expanding the list of Canadian goods facing 50% tariffs. Canada answered with tariffs on about $20 billion of American exports.

That’s old news at this point.

One unknown plot twist in this trade war drama is how Canada has spent years building the ports and rail lines needed to sell around the United States. Now the Canadian Pacific Railroad is positioned to cash in.

Canada’s Frosty Express

Canadian Pacific merged with Kansas City Southern (KCS), a U.S. regional, in 2023. That deal included KCS’s Mexican operations. Canadian Pacific’s network now runs roughly 20,000 miles from Canada into Mexico thanks to that deal. It is effectively a Canada to Mexico direct line: one railroad. One company. At the moment, the U.S. doesn’t even have such a thing connecting East to West. Canada has one connecting north to south — between three nations.

Carney has called Canada’s dependence on the U.S. market an economic vulnerability and set a goal of doubling exports to countries other than the United States within a decade. It also seeks to increase exports to China by 50% by 2030. Ottawa is spending C$5 billion in a Trade Diversification Corridors Fund for ports, rail and highways in its effort to expand non-US trade.

The money is already moving. Ottawa has committed more than C$303 million to infrastructure at Prince Rupert port in British Columbia. The Canada Infrastructure Bank added a C$150 million loan to help make it happen. Vancouver’s Roberts Bank Terminal 2 is expected to increase Canadian West Coast container capacity by more than 30%. Canada is subsidizing the gateways competing with American ports for trans-Pacific cargo — like Chinese imports, presumably including those that will make their way into finished goods bound for the U.S., or as part of the Michigan-Canada automotive trade.

The Canadian Pacific Kansas City company, known as CPKC up north, will be the “land bridge” that lets Canadian and Mexican producers reach each other without treating the United States as the final customer, said Keith Creel, CPKC’s CEO.

Can it work? 

Last September, Creel joined Carney at a Mexico City grain terminal to welcome a train of Manitoba wheat that had crossed the United States on its way to Mexican buyers. CPKC has said its Canada-Mexico business was worth roughly $100 million in 2023 and could reach $600 million this year, with a longer-term opportunity of $1 billion. 

Can’t Beat ‘Em, Join ‘Em

It is hard to imagine — but if the United States-Mexico-Canada Agreement (USMCA) is broken up into two separate bilateral trade agreements instead of the existing trilateral one — Canada can use U.S. turf to trade with Mexico, maybe even duty free (which would put many Canadians out of work, but that’s another story).

CPKC sells the reverse trip, too. CPKC pitches Mexico’s port of Lázaro Cárdenas to Asian shippers as what its own executives nicknamed the “Texas shortcut,” a way to land Asian containers in the American Midwest without calling at an American port. The railroad puts its Asia-related traffic at roughly $2 billion a year. Every container moving through a Canadian or Mexican gateway represents business that an American port did not capture.

No U.S.-owned railroad operates a single line from coast to coast. The American rail shipping network does not have a direct equivalent to CPKC’s three-country service.

U.S. companies are trying to do that East to West. Union Pacific and Norfolk Southern are seeking approval for a merger that would create a roughly 50,000-mile U.S. single coast to coast network spanning 43 states and more than 100 ports. The U.S. Surface Transportation Board resumed its review Aug. 18 on the deal.  Given CPKC’s direct to Mexico line, at the very least the U.S. should have a California to New York line to remove shipping bottlenecks between companies.

The Canadian shippers hate this idea, though. CPKC has called the merger unnecessary.

“A combined Union Pacific-Norfolk Southern could place nearly 50 percent of U.S. freight rail traffic in the hands of a single company,” Creel said on May 11 from his offices in Calgary, Alberta. “None of this serves the public interest. None of this serves the interests of shippers. All of it puts our supply chains and economy at needless risk.”

An American railroad running ocean to ocean turns the Canada to Mexico railroad from the only game in town into one that now has Union Pacific’s Mexico connector that could take some market share. Canadian Pacific’s growth story includes routing freight around American customers while telling American regulators that American railroads shouldn’t build their own “land bridge.”

Whether the Union Pacific-Norfolk Southern merger ultimately makes sense on competition grounds is for regulators to decide. But the strategic question should be part of that debate. North American freight infrastructure is no longer simply about moving goods efficiently inside the United States. It is becoming part of a broader competition over which country’s ports, railroads and logistics networks capture the trade.

Canada has already built its north-south land bridge.

The United States is still deciding whether it wants an east-west one.

Kenneth Rapoza is a former staff reporter for the Wall Street Journal in Brazil. He covered the BRIC countries for Forbes up until 2020 before becoming a Senior Analyst for the Coalition for a Prosperous America. He lives in Massachusetts, where on clear fall days, he can see Vineyard Wind turbines on the horizon.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.

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