Freight trains across Canada have been completely shut down and some passenger traffic is also suspended, as thousands of workers at the country's two main railway companies have been locked out despite efforts by the federal government to demand a deal to end their labor dispute.

Canadian National (CN) and Canadian Pacific Kansas City (CPKC) said Thursday morning they have acted on their lockout notices and shut down services after negotiations with the Teamsters Canada Rail Conference (TCRC) union failed to reach an agreement.

The CPKC said in a statement: “You have negotiated in good faith, but despite our best efforts, it is clear that a negotiated outcome with the CFTC is not within our reach.”

“CFTC leadership continues to make unrealistic demands that would fundamentally harm the railroad’s ability to serve our customers with reliable and competitive transportation service,” the CPKC said.

CN said in a separate statement that the union did not respond to another offer in a last-ditch attempt to avoid a work stoppage.

“Without an agreement or binding arbitration, CN had no choice but to end a safe and orderly shutdown and proceed with a lockout,” the rail operator said.

The TCRC, which represents about 10,000 CN and CPKC employees, said that despite months of negotiations, all parties “remain far apart” and that “the main obstacles to reaching an agreement remain the companies' demands, not the unions' proposals.”

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This is the first time that a work stoppage has occurred simultaneously at CN and CPKC, which are responsible for the majority of freight rail operations in Canada.

The impasse is also affecting tens of thousands of passengers in Toronto, Montreal and Vancouver, whose lines run on CPKC-owned roads. Passenger trains cannot travel on those tracks without being sent off by blocked traffic controllers.

The railway closure, which has affected business groups, the agricultural sector, exporters and retailers, could lead to massive losses and cause supply chain disruptions in various industries that depend on rail networks.

Speaking to Global News on Wednesday, Labour Minister Steve MacKinnon said there remain “major issues” in negotiations between the two rail companies and the unions.

“The economic consequences would be significant and the impact on ordinary Canadians would be significant,” he said.

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The railroads and the union have accused each other of refusing to address sticking points, and mediators have been hired to try to break the impasse over scheduling, relocation and worker safety issues.

“Throughout this process, CN and CPKC have shown themselves willing to compromise rail safety and separate families to make more money,” TCRC Chairman Paul Boucher said in a statement.

“The railroads don’t care about farmers, small businesses, supply chains or their own employees. Their only goal is to improve their bottom line, even if it means jeopardizing the entire economy.”

– with files from Sean Boynton and Mackenzie Gray of Global News and The Canadian Press.