CN and Union Pacific rail pact creates 3-nation freight corridor

A binding agreement between CN and Union Pacific will expand Chicago rail access and open a new freight corridor connecting Canada to Mexico.

Canadian National Railway and Union Pacific signed a binding agreement granting each other operating rights across key US corridors, creating a direct rail link between Canada, the US and Mexico.

"We are thrilled to have an agreement with Union Pacific to expand CN's access to Mexico," said Tracy Robinson, President and CEO of CN. "This is a natural extension of our north-south franchise and will open new routes for customers."

The pact gives Union Pacific expanded rights over CN's Elgin, Joliet & Eastern Railway corridor around Chicago — the busiest US rail hub — while granting CN access to Union Pacific's network between Memphis, Tennessee, and Eagle Pass, Texas, a key border crossing for Mexico-bound freight.

The agreement positions both railroads to capture growing cross-border trade flows as North American supply chains shift toward nearshoring. Canada-Mexico bilateral trade reached C$48.6 billion in 2025, up 18 percent from 2020, according to Statistics Canada, with rail carrying a significant share of industrial goods and energy products.

The MOU builds on CN's broader push to expand its north-south franchise. The railroad is also advancing the Alberta Corridor Export Rail Terminal Project with Keyera Corp. and AltaGas Ltd., a C$240 million investment designed to move 45,000 barrels per day of propane and butane from Alberta's Industrial Heartland to West Coast export facilities by mid-2028.

CN's propane export volumes are already accelerating. Shipments from South Beamer, Alberta, to Watson Island, British Columbia, hit an all-time monthly record in May, with carloads rising 40 percent from a year earlier, the railroad said.

Chicago rail congestion and the EJ&E bet

For Union Pacific, the deal provides access to the EJ&E route — a 198-mile bypass around Chicago that CN acquired in 2008 for US$300 million to ease congestion through the city's crowded rail network. "I've seen the benefits first-hand of what the EJ&E route around Chicago can do for a railroad," said Jim Vena, CEO of Union Pacific.

Chicago handles roughly one-third of all US rail freight, and delays there ripple across the entire North American network. The Illinois Tollway is simultaneously advancing the US$26.5 billion I-490 project west of O'Hare International Airport, which includes bridges spanning Union Pacific tracks — a sign of the infrastructure demands created by rising freight volumes.

Cross-border growth trajectory

The Canada-Mexico rail corridor has become a strategic priority for both countries as companies diversify supply chains away from Asia. Mexico surpassed China as the top US trade partner in 2023, and Canadian rail shipments to Mexico have grown at an average annual rate of 8 percent over the past five years, according to Association of American Railroads data.

The agreement does not require regulatory approval from the US Surface Transportation Board, the companies said, as it involves operating rights rather than a change in control. The binding MOU sets the stage for final implementation agreements in the coming months.

For CN, the Memphis-to-Eagle Pass route fills a critical gap in its network. The railroad already serves the Canadian and US Midwest markets but lacked direct access to the Mexican border through its own rights. Union Pacific, which operates the largest US rail network west of the Mississippi, gains a faster path through Chicago — a bottleneck that has historically added 24 to 48 hours of transit time for trains routed through the city's congested railyards.

The deal also carries implications for the broader North American logistics sector. Rail accounts for roughly 40 percent of US freight ton-miles, and any improvement in cross-border rail efficiency reduces costs for shippers of automotive parts, agricultural products, chemicals and energy commodities. Canadian crude-by-rail volumes to the US Gulf Coast, which averaged 95,000 barrels per day in the first quarter of 2026, could benefit from improved network fluidity, according to data from the Canada Energy Regulator.

This article is for informational purposes only and does not constitute investment advice.