Canadian Pacific Railway Ltd. trains were halted Sunday morning, stalling global shipments of key manufactured goods and commodities such as fertilizers, after an impasse in contract negotiations between the company and its conductors and engineers.

Canadian Pacific and the Teamsters Canada Rail Conference, which represents more than 3,000 conductors, engineers and yard workers at the railway, disagreed over what triggered the breakdown in talks. The railway has been in negotiations and mediation since September with the union, which seeks increased wage and pension benefits and more rest times.

A spokesman for Canada Minister of Labour Seamus O’Regan said officials with the railway and union restarted discussions Sunday with the help of a federal mediator.

Canadian Railway said if the two sides were unable to agree on a new contract it would favor shifting the discussions to a binding arbitration process.

The Teamsters initially referred to the work halt Sunday as a lockout and later described it as both a lockout and a strike. Patrick Waldron, a spokesman for Canadian Pacific, disputed the characterization that the shutdown was a lockout.

The railway’s representatives were still at the negotiating table Saturday night with a federally appointed mediator in Calgary, Alberta, Mr. Waldron said, waiting for a response to a new offer when the union issued its statement that the railway had initiated a lockout.

The railway’s representatives were still at the negotiating table Saturday night with a federally appointed mediator in Calgary, Alberta, Mr. Waldron said, waiting for a response to a new offer when the union issued its statement that the railway had initiated a lockout.

Canadian Pacific continues to want to bargain in good faith with the union, he said. “The union’s actions show a complete disregard for the unnecessary damage this will cause to the supply chain,” Mr. Waldron said.

The union didn’t respond to requests for comment.

The prospect of a strike prompted a number of businesses, customers and politicians to publicly urge the Canadian government to introduce back-to-work legislation that would force striking workers to return to their jobs. Such a law would require a vote of Canada’s parliament, which is set to convene Monday after a break.

Labour Minister Mr. O’Regan traveled to Calgary, where contract negotiations are taking place. He had urged both sides to avoid a work stoppage that would exacerbate existing supply-chain bottlenecks and rising commodity prices. Halting Canadian Pacific’s trains “couldn't have come at a worse time,” he said in a video statement posted on Twitter.

Canadian Pacific is the sixth-largest freight railway in North America, shipping goods across Canada and south to central U.S. states. It is the primary shipper of fertilizers such as Canadian potash, which is mined in the province of Saskatchewan.

Nutrien Ltd. is the world’s largest corporate potash producer, and most production from its Saskatchewan mines is transported by Canadian Pacific to ships destined for foreign nations. Nutrien said that it plans to increase its annual production of potash this year by about 7%, or nearly 1 million metric tons, after potash shipments from Russia and Belarus, major producers, were effectively halted in the wake of the Ukraine war.

Nutrien Chief Executive Ken Seitz said that if the rail strike extends for more than a few weeks, the company will start reducing production at its potash mines because its warehouses are full of the fertilizer for planting season.

“It’s a frustrating situation given what is going on in the world, and we would expect some legislation,” he said.

Write to Jacquie McNish at Jacquie.McNish@wsj.com