Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) have shut down their rail networks in the country on Thursday and locked out nearly 10,000 workers after unsuccessful negotiations with a major labor union.

READ MORE: Canada-wide freight rail stoppage looms as two firms issue lockout notices

The decision, confirmed by the Teamsters union, sets the stage for an unprecedented rail stoppage that could badly damage the Canadian economy and have a significant effect on cross-border trade with the United States.

Canada is the world's second-largest country by area and relies heavily on rail transport. The stoppage is set to cripple shipments of grain, potash and coal while also slowing the transport of petroleum products, chemicals and autos.

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Industry groups had urged Prime Minister Justin Trudeau's Liberal government to prevent a stoppage, noting Canada's railways transport around C$380 billion ($277 billion) worth of goods annually.

US railroad Union Pacific said on Tuesday a stoppage would halt the movement of 2,500 rail cars across the border daily.

The Canadian and US economies are highly integrated. Rail transport accounted for 14 percent of total bilateral trade of $382.4 billion between the countries for the first half of the year, according to the US Department of Transportation.

READ MORE: Industry and shippers brace for Canada rail stoppage, fear 'catastrophe'

The stoppage comes after months of talks. The union and the companies struggled to reach an agreement on key terms, with both sides accusing the other of bad faith.

Teamsters said none of its offers were "seriously considered" by the companies, adding that it will remain at the bargaining table with both firms despite the lockout.