Economic impact from freight rail strike could total $2B per day

Rail stakeholders are concerned that a possible strike by some union members due to stalled contract negotiations could result in multibillion dollar economic impacts.

The Association of American Railroads estimates that a nationwide shutdown of rail operations could cost $2 billion in lost economic output each day, according to a report released Thursday. AAR reached its conclusions by updating data from a 1992 Federal Railroad Administration econometric study. 

AAR, which represents freight and passenger railroads, also said a short-term switch to trucks or barges “would be costly and disruptive,” with an additional 467,000 long-haul trucks needed per day to handle the freight that would have otherwise gone on rail.

“Railroads operate in an intensely competitive transportation marketplace. Firms rarely rely exclusively on rail transportation,” the report said. “Over the long term, most firms that use rail  transportation could modify their distribution patterns or production processes so they would not have to use railroads as much as they do today. 

“For most of those firms, though, switching on short notice to trucks or barges, or changing their production processes to reduce or eliminate the need for rail service, would, at best, be extremely costly and disruptive. In many cases, it would be completely impractical,” AAR’s report continued.

A new labor deal for union members has been in the works since January 2020, but negotiations between the unions and the railroads had failed to progress. A federal mediation board took up the negotiations but released the parties from those efforts earlier this summer.