OTTAWA (Reuters) - North American industry groups and shippers are bracing for an unprecedented simultaneous stoppage at both of Canada's main railway companies that could inflict billions of dollars' worth of economic damage.

Canada is the world's second-largest country by area and relies heavily on trains to transport grain, beans and other dried seeds of legume plants, potash, coal, automobiles and other goods.

"It's a catastrophe. Literally nothing would move," said Greg Northey, vice president of public affairs at Pulse Canada.

Talks between Canadian National Railway ( CNI ) and Canadian Pacific Kansas City ( CP ) on one hand and the Teamsters union on the other have deadlocked, with each side accusing the other of bad faith.

The rail companies say they will start locking out workers on Aug. 22 if they cannot reach a labor deal while the union says it is ready to call a strike for that date.

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

"Factoring in the millions of Canadian jobs that would be impacted, the magnitude of the disruption is daunting," the Business Council of Canada lobby organization said in an open letter to Trudeau and Labour Minister Steven MacKinnon.

A stoppage would also hit the United States, given the degree of integration between the two economies. Canada sends around 75% of all goods exports south of the border. The networks of the two Canadian rail operators, CN and CPKC, connect with several key U.S. rail and shipping hubs such as Chicago, New Orleans, Minneapolis and Memphis.

CN said on Tuesday it was putting in place an embargo on any new reservations for movement of hazardous materials, security-sensitive cargoes or refrigerated containers originating in Canada, starting on  Thursday.

In anticipation of a potential lockout, it also announced it was embargoing all intermodal traffic originating from over half a dozen U.S. hubs with which its network connects, starting on Friday. 

Separately, U.S. rail operator Norfolk Southern ( NSC ) on Tuesday advised all customers that it was embargoing all hazardous and security-sensitive cargoes to or from CN and CPKC's networks effective immediately. It also said additional embargoes may be issued in case of any work stoppages at the Canadian rail operators.

($1 = 1.3721 Canadian dollars)